Invest Your Emergency Fund

An emergency fund is an essential part of a solid financial plan and can be very useful in times of financial crisis for unexpected and unplanned scenarios. Simply put — when you’re faced with life’s unexpected events, you want to be ready.

Ever found yourself in one of these situations while low on cash such as:
• A bigger than predicted expense
• Loss of a job
• Your baby arrives weeks early
• Emergency repair(car, home)
• Someone close to you becomes significantly sick

While emergencies can’t always be avoided, having emergency savings can take some of the financial sting out of dealing with these unexpected events. Apart from financial stability, there are other pros to having an emergency reserve of cash. You may be asking, Why do I need an emergency fund?

Emergency funds create a financial buffer that can keep you afloat in a time of need without having to rely on credit cards or high-interest loans.

What is it: Money set aside for emergency expenses
Why it is Important: Saves you from borrowing and relying on credit cards or high-interest loans.
How much to Save/Invest: You should have at least 3 to 6 months’ worth of expenses (may vary depending on your lifestyle, monthly costs, income, and dependents)
Where to Save/Invest: A high Yield investment account that can easily be accessed.

How to build an Emergency fund

1. Calculate the total that you want to save
2. Set a monthly savings goal
3. Start saving/investing
4. Keep it steady by automating your savings
5. Assess and adjust your contributions
6. Gradually increase your savings
7. Save unexpected income
8. Keep saving even after reaching your goal

Having something in reserve can mean the difference between weathering a short-term financial storm or going deep into debt.

3 benefits of having Emergency money

1. It helps keep your stress level down: If you’re living without a safety net, you’re living on the “financial” edge, hoping to get by without running into a crisis. However, being prepared with an emergency fund gives you confidence that you can tackle any of life’s unexpected events without adding money worries to your list.
2. It keeps you from spending on impulse: Like they say, ‘out of sight is out of mind’ gives credence to the fact that keeping the money out of your immediate reach means you can’t spend it on a whim, no matter how much you’d like to.
3. It keeps you from making bad financial decisions: By default when you’re financially stuck, the first thing that comes to mind is to quickly borrow, but at whose expense? Interest, fees, and penalties are just some of the drawbacks.

Making a move to invest your emergency fund could not only prevent you from taking on high-interest debt to pay bills, it could even help it grow over time. That’s why the best time to start saving for an emergency is today.

Remember: When you do have to take money from your emergency savings, it’s important to immediately start rebuilding it to ensure you are always ready.