How to Create a Family Emergency Fund
Creating a family emergency fund is a vital part of an investment program. An
emergency fund can provide much needed money in a family crisis. Many financial
professionals indicate a family should stash away at least six months of income
into an emergency fund.
However, three to four months of income is more
realistic for families with a steady income. One of the best ways to calculate
the appropriate size of an emergency fund is review your budget. This will
indicate how much liquid capital you may need to supplement your lifestyle in
time of need. If you currently don't have an emergency fund in place, the
quickest way to get one started is add the heading of Emergency Fund to your
budget. This new account should be funded on a monthly basis. Once you have
three to six months of income in this account your emergency fund is in place.
However, what would happen if an emergency occurs before this account is
completely funded. Below are five suggestions how to obtain funds in a
relatively short amount of time:
- PLACE OVERDRAFT PROTECTION ON YOUR CHECKING ACCOUNT
Overdraft protection prevents a check from being returned "NSF"
(non-sufficient funds). Overdraft protection is a loan made by the bank to
you should you accidentally write a check greater than what is in your
checking account. The overdraft loan from the bank is paid back in monthly
- OPEN A LINE OF CREDIT
A line of credit, also known as a signature loan, is an unsecured loan
that has already been approved by the bank. In time of an emergency you
would need to visit the bank and sign the paperwork to obtain the cash.
- OBTAIN AN EMERGENCY LOAN
An emergency loan is a short term cash advance paycheck loan. These are
ideal when you need money immediately. This type of loan can be used until
you secure your emergency fund or obtain the other suggestions on this page.
To learn more about how an emergency
loan can help you and your family
- USE SECURED LOANS
A secured loan is a loan secured by another asset. For example, if you
have a $1,000 6 month certificate of deposit (CD), you could obtain a loan
for approximately $1,000 by using your CD as collateral.
- IF YOU ARE A HOMEOWNER, CONSIDER OBTAINING A HOME EQUITY LOAN THAT
OFFERS CHECKING WRITING
You need to fill out all of home equity paperwork with the bank or
mortgage company. Once everything is complete, the bank should give you a
checkbook instead of a lump sum for your refinance proceeds. By having check
writing privileges, you can write checks for any amount up to the
pre-determined limit. This is a great way to have funds available for an
emergency. The interest for this type of loan may also be tax deductible.
Check with your tax advisor to determine if this type of interest is tax
deductible for you.
- CREDIT CARD CASH ADVANCES
Use this option as a last resort.
Hopefully, you will never need to tap into your emergency fund. However,
should you need to replace the engine in your car or supplement your income
due to loss of a job before your emergency account is fully funded, you now
have several possible options to chose from. Good luck in your future.
Well, I hope that
this web article has been informative. If nothing else, I hope you are now
aware that you can achieve your financial dreams using simple and little
know money strategies. For years you have been taught that only financial
experts can guide you through the “Money Maze”. Now you know otherwise.
Another option for obtaining money in
very short time period is actual a short form payday loan
application. You can request up to $1,500 from the privacy of your
very home learn more about short
form payday loans.