Step One: Start Now
When it comes to saving for emergencies, it is best to start as soon as possible, even if that means starting small. Even a few hundred dollars set aside can save the day when a minor emergency occurs. The advisors at Nerd Wallet remind readers that $500 can make a huge difference, and is a great start to a long-term savings plan.
Step Two: Set a Realistic GoalWhen planning your savings, it is important to set a goal. This will help you stay focused on the task, as you will be working towards something tangible and attainable, rather than setting aside money for a generic reason. Many consider the equivalent of three to six months of expenses a wise amount to save for emergencies. When figuring out how much this means for your specific case, be honest with yourself and remember to include all expenses, including fixed items like utilities and changing items like materials or medicine.
This concept applies to businesses as well, though it will look a little different in practice. A business owner will have multiple things to consider beyond basic expenses and will also want to consider plans for expansion when creating this “rainy day” account. Make sure you do some research and assess the current profitability of your company before deciding how much to set aside for the specific emergencies you might face, including fire-related emergencies, and how many people stand to be affected if your business is damaged.
Step Three: Decide on LocationWhether setting aside emergency money for a home or business, there are a variety of options when it comes to choosing a home for your fund. You want to make sure to put it somewhere it can be accessed quickly without consequence. A savings account is a great idea. Many recommend a high-yield savings account that will collect interest as it waits for you to need it. You could also consider money market accounts, or look into investing the fund, though investing the entirety of it is not recommended, as certain investments will be difficult to access or incur penalties when accessed too soon.
The most important thing you can do when saving for an emergency is keep yourself accountable and only touch your emergency fund for actual emergency reasons. If you work hard to set aside the money, but dip into it every time a unexpected but unnecessary expense arises, it will not be there when you really need it. The more you can do to prepare and plan ahead of disaster, the better you will be protected when it strikes, so try to start implementing these tips today!
September is National Preparedness Month, and this year we will be observing it with a series of articles on fire safety for your home and business. Every Friday we will address how to apply Ready.gov’s weekly theme to fire-related emergencies. We will also post several other articles throughout the month addressing specific fire and life safety concerns. Drop us a comment on Facebook, Twitter, or LinkedIn if there is a preparedness topic you would like us to cover!