Why Save for Emergencies?
Make an emergency savings account part of your financial plan.
When faced with a financial crisis, having savings set aside can keep you from going into high-interest debt. If you’re already managing debt, creating an emergency savings account is still important as it can help prevent you from going further into debt.
Your car breaks down. You wind up in the ER because of an unorthodox dance move. You book a last-minute flight for a family matter.
These unexpected situations can take your finances on a roller coaster ride, but – with an emergency savings account set aside – they need not be more than a minor blip on the radar.
Who should have an emergency savings account?
Everyone! You never know when you might need that cushion to fall back on.
Even if you’re already managing debt, creating an emergency savings account is still important as it can help prevent you from going further into debt.
When do I use my emergency savings?
Remember this account is for emergencies only, which means unexpected events you can’t control. Most true emergencies will fall under one of these categories:
Situations that don’t warrant using your emergency savings include:
- Gotta get away, limited-time sales (and it’s been so long since you’ve had a vacation)
- “Once-in-a-lifetime” concert tickets
- Snagging a reso at the hottest new restaurant in town
How much do I save?
The general rule is to save three to six months’ worth of living expenses. When calculating this number, include only the necessities such as your rent or mortgage payment, utility bills, insurance payments, loan payments, groceries and basic toiletries.
If that seems like an insurmountable figure, remember that any amount in emergency savings is better than nothing. Even just a couple hundred dollars can make the difference when trying to manage an unplanned bill.
Everyone should have savings strategies that include an emergency savings account in their budget.
UW Credit Union believes in empowering individuals to control their finances through ongoing learning. Whether it’s your first bank account or your fifth, we’re Here for Every You.