Emergency fund: Secrets to Creating a Family Emergency Fund
Have you ever had a financial emergency or money problem in your family? This is where you need money and need it fast. You do not have an emergency fund.
- The car breaks down when you least expect
- The heater/washer/dryer or some major house hold equipment breakdown and needs to be repaired or replaced?
- You or a family member gets sick or God forbids dies?
But you are not prepared for any of these and you are left financially naked. You have to either resort to credit card or try to borrow from others. But if you had emergency fund things would not be so desperate.
Money magazine says the 78% of people face a major negative financial event in any 10 year period. That is you are likely to face a financial emergency once every 10 years. Very few people have
Are you prepared if something were to happen in your family today, this week, this month or this year?
How do you avoid or minimize the effects of a financial emergency?
Dave Ramsey has some really cool tips to help us overcome financial emergency problems. In his book “The Total Money Makeover Workbook” he has what he calls baby steps.
One of the first steps is to quickly start what he calls a financial emergency fund. He says $1000 should be your first goal. But I think you can start with $200/300/500 and build up on it monthly.
How do you go about doing this when you are already cash strapped and on a budget?
Sit down and write 10-20 ideas that you can use to make extra money. It doesn’t matter how wild the idea seems. If you can come up with more than 20 that is even better. You can also include the children. They will enjoy helping to contribe to the family emergency fund too.
You ideas can include:
- working extra hours
- doing lawns
- taking on extra jobs (cleaning, baby sitting etc)
- using your hobbies to make cash
- selling items in your home that you do not need
- Buying and selling things in auction
Then take the easiest and simpliest of these ideas and start doing it today. All the cash you make will go towards building your emergency fund.
This will help your family avoid the money problems that can create havoc in emergencies.
Emergency Fund Part 2
The ideal situation is for you to grow your family emergency fund the way businesses have what is called a reserve fund. This is a cash account that will pay all the expenses of the company for 6-12 months if for some unforeseen circumstance there is no income for that period of time.
Similarly your family should have at least 3-6 months of cash that can pay all your expenses if for some reason there is no income for 3-6 months.
Work out how much it takes to run your family every month and try and save 3-6 times that amount. This is only for emergency. It must not be touched for car repairs, christmas shopping, appliance repair or break down. These are events that you know will happen so you should budget for them. The emergency fund is only for unforseen circumstances.
If you suddenly fall sick, get in an accident or get sacked from your job this fund will act as a buffer until you can find another job or income source for your family
For more information feel free to check Dave’s site www.daveramsey.com