Experts recommend having an emergency fund large enough to cover six months of expenses in the event of job loss, illness, or other unexpected events.
With the economic challenges of the past few years, many people are more concerned with everyday expenses than planning for a bump in the road, or even for good stuff like vacations. So how do you save for a vacation, or deal with the expense if your car breaks down on vacation? Here are a few easy steps you can take to save for a rainy day.
Have a separate savings account with automatic transfers
Even small amounts such as $25.00 per week can add up quickly. Several online banks make it easy to set up these types of accounts in minutes. Large banks also have programs that will transfer money to a savings account every time you use your debit card.
Have a credit card for emergencies
In the current economy, the last thing anyone wants is debt hanging over their heads. However, it is a good idea to have a credit card in case of emergencies. Used wisely, a credit card can provide some peace of mind in planning for and dealing with unforeseen expenses.
Investing and insurance
Setting up regular investments, such as a 401k, a Roth IRA, disability insurance or a whole life insurance policy, can protect you against large expenses or life-interrupting incidents. These accounts can be set up through work or independently through financial advisors and can be accessed for cash in case of emergency. 401ks will build interest over time, and whole life insurance policies convert to cash value over time. For a small monthly investment, you can build a nest egg that, if you don”t need the funds for emergencies, can become a significant part of your retirement portfolio.