Even if you’re just in the beginning stages of putting your family on a budget, one of the first things you need to do is start an emergency fund. This is money that you’ve set aside to use for emergencies. That way, when something comes up (like you need a new a/c unit or your car breaks down) you don’t put it on a credit card without being able to pay it off at the end of the month.
How Much Should I Put Aside?
Ideally, an emergency fund should constitute three to six months of your living expenses, but for the sake of this article, we’re just going to cover those unexpected but not completely unpredictable expenses that take our monthly budget by surprise. In the meantime, you definitely should be working towards a larger reserve in case the truly unimaginable happens and you lose a source of income.
Where Should I Put It?
While interest rates are not what they were, there are some choices out there in where to stash your emergency fund. While it’s sitting waiting for your next emergency, you should have it parked somewhere that it’s going to be working for you, harder to get to, but not impossible to access when you need it.
Sallie Mae for Short Term Savings
We use Sallie Mae for our day to day savings. I deposit the amount of money we’ve spent each week into this account, let it accrue interest until the credit card bill is due, and then have it set to autopay the bill. We probably make close to $100 per year in passive interest just by parking our money here for the interim!
Brinks for Long Term Savings
The next product we use is a Brinks account by BofI Bank. This is a bit more of a convoluted process, because you have to start with a Brinks prepaid MasterCard and then transfer your money to its connected savings account through the prepaid account. The savings account will pay 5% on up to $1000, which is $50 per year. I transfer the interest to Sallie Mae each quarter because Brinks pays next to nothing over $1000. Since your emergency fund should be over $1000, you can refer your significant other to sign up for an account as well. You’ll be $40 richer since you will get a $20 bonus and so will they with at least a $40 deposit.
Open Your Savings Account Today
So get your emergency fund set up as soon as possible to cover your budget from large, unexpected expenses, and have your money work for you by keeping it in a high-interest account.