Having an emergency fund by the side in the form of short-term savings can be of great use in times of financial crunch. The rationale behind this thinking lies in the fact that emergencies can fall on anyone at anytime. For that reason, it’s good to be well-equipped financially before the crunch situation rolls in.
Are you looking at ways to manage your emergency fund savings for unexpected unemployment or illness? Read on as we explore the subject in detail.
Calculate Your Emergency Fund Amount
It might not sound like a great idea at the beginning. But keeping an account of necessary expenses is one of the basic rules that you need to follow to manage short-term savings. It’s never a bad option to bank enough to be able to cope up if you are caught up in an emergency.
For that reason, you want to keep a fine record of your monthly expenses. In your budgeting process you can add up the amount you usually spend almost every month on your basic necessities like accommodation, meals, clothing, expenditure on kids and others. This can offer a rough idea of the expense incurred on some of the most common daily needs.
Apart from these small basic necessities, it’s always good to look into the future to keep a record of the upcoming grand responsibilities. It might come your way in the form of a wedding, college education, some kind of renovation work, to mention a few.
Save and Invest Your Emergency Fund
Once you calculate the monthly expense and the upcoming grand expenditures, it’s time to keep some money aside (apart from the one calculated above). This is for emergency provisions in the form of some investment strategies. Most of us are familiar with these strategies but now is the time to give them a serious thought.
1. Savings account. Savings account is one of the most commonly and widely used method of saving money. The returns in this kind of saving are usually low while the money is quickly and easily accessible. So it’s always easy to withdraw the money from a saving account in times of emergency.
2. Mutual Funds. These are the special kinds of bonds that are meant for those interested in short-term savings and the best part about these funds is that they offer good returns as compared to the savings account.
3. Certificate of Deposit. Also known as CD, these are the deposits that are accessible at a financial institution or at a bank. The interest rate in these deposits is almost similar to the mutual funds. The interest is payable on a regular basis till the maturity of the deposit. When the certificate of deposit matures, the original amount gets repaid along with the total interest payments.
Apart from these, one of the most attractive avenues for most of the investors today is stock market. Stocks have a successful history of providing great returns to the investors.
Manage Your Emergency Fund Saving Account
If you find it difficult to save money, there is no better option than the automated transfer programs. It’s easy, convenient and regular.
Just ask your employer to automatically keep some part of your salary in the form of a saving. This makes the saving process mandatory because a fixed amount of money goes into your saving account at a regular basis, thereby stashing your cash.
These are some of the quick steps that you can easily follow to manage your emergency fund saving. Just think about this. Financial instability is a common situation that can attack any one of us. So it’s better to be fully equipped to cope up with it than to repent later.