Emergency Funds

Debt and Bankruptcy | Nonprofit Credit Counseling

On occassion you will find yourself in a financial bind, it's times like these that call for emergency funds.

You never know when those unexpected expenses show up such as car repair, medical work that isn't covered by insurance, or the cut backs at your job that leave you scrambling for new employment. It's is much easier to deal with these problems if you're not worried about how you're going to pay your bills for the month.

Remember that little emergencies do come up regularly, so it's a good idea to have an emergency fund of some size at all times.

Where should I store emergency funds?

A money-market mutual fund is a good place to store cash for your emergency fund. Look for a mutual fund with low expenses, high yield, an investment minimum that matches your needs, and check-writing features that make it easy to access the money quickly. Click here for a glossary on personal finance terms.

Also, it's not a good idea to lock up your emergency fund, because you won't be able to get to it when you really need it.

Remember when you go into your emergency fund and use cash, don't forget to add cash the fund when you earn a few extra dollars. The only way to have an emergency fund available is to keep money in it. When life's little emergencies strike, at least you will be prepared to deal with it.