Rainy Day Fund

Create An Emergency Cushion

With the holiday shopping season and New Year quickly approaching, many families are getting concerned that the season won’t be as bright as in previous years past. Many families may even consider the option of taking out payday loans to cover the cost of presents and entertaining for the Christmas holidays.

We all know about saving for a rainy day, but in today’s economy it seems like every day is a rainy day. Creating an emergency fund can dry up those rainy days and give us peace of mind for the future. Don’t walk around without your financial cushion.

What is an emergency fund?

It is a sum of money that is set aside for the “what ifs” in life – such as an exorbitant heating costs during an extremely harsh winter. Any one of us can have a misfortune befall us. Natural disasters put people in financial binds all the time. Accidents, job loss, death, divorce, and other situations can set us back quickly. Unless you are independently wealthy, your finances will take a hit.

Be prepared for the worst with an emergency fund.

It does require sacrifice on our part to set up the fund. No one just has money lying around to put in a savings account so we have to create the opportunities.

The basis of the fund is to have at least three to six months of income set aside for those rainy days. If you and a spouse work then both incomes are included. But, for some, that is a large dollar amount. Let’s start with something a bit easier.

It can take a while to save that much money. Set smaller goals so that the larger one doesn’t seem so unreachable. Begin with saving a certain dollar amount from each paycheck.

For convenience, if you have direct deposit, modify it so that amount automatically transfers to your savings account. This keeps the money out of your hands where it may or may not make it to its predetermined destination. We all get a little weak in the knees when it comes to money.

Consider opening a Christmas savings account and having direct deposits made so you won’t have to worry about cheap presents for the holiday season.

Empty your pockets every night.

This is more of a man thing to carry change in their pockets. Place those coins in a Mason jar or a piggy bank. At the end of each month or once the container is filled, go to one of those cash machines in the grocery store and tally it up. Add that money to your emergency fund. This is something everyone, even kids, can do to help out with the financial cushion.

Keep everyone accountable.

Remind your family members of the peace of mind that comes with knowing you can handle financial emergencies when everyone pitches in to save money.

The hardest thing will be not disturbing the emergency fund. The sacrifices that you make will be in the form of incidentals that you don’t need to have. Examples of these things include, going to the movies, going out to dinner, buying new clothes or shoes unnecessarily and more. It also encourages us to find new ways to enjoy family time. Spending less time on the go will allow you to find activities your family can do together at home or that cost little or no money out and about.

What about your emergency fund? Have you started it? If not, throw a few pennies in a jar and begin today.

photo credit: Ken Wilcox.