What do you do when a real financial emergency happens? And it will happen. Your water heater will eventually need repair or replacement. You will someday need a major dental procedure. You will be so lucky as to run over a piece of metal in the road and need to buy a new tire. All of these have happened to me. These are true emergencies that warrant withdrawing from the emergency fund.

Putting money into the emergency fund has to happen before money can be taken out. The best place to keep this money is in a savings account at the bank. It is safe, but easy to get to should an emergency happen. Keeping cash around is risky. Finding extra money to put into the account can be a daunting task. There is a good phrase to remember: “Pay yourself first!” It means putting money into savings before you ever see it. Out of sight, out of mind, as they say! You can determine how much you can afford to save and make that deposit as soon as you are paid. You could also set up an automatic withdraw from your checking account into your savings account, then you won’t be tempted to forget to do it.

A $50-a-month deposit will be $600 at the end of a year, and $3,000 at the end of five years if you make no withdrawals. If $50 is too much, try to put in $25 or even $20. If even that is too much, just save the change out of your pocket or billfold each night. Even that can add up. The important thing is just to get started.

Anytime you get a bonus, an extra commission, a tax refund, a gift of money, or you do a small odd job and get paid, add that money to the emergency fund.

How much should you have in the emergency fund? First, start out by getting $1,000 as quickly as you can. A garage sale could be a great way to kick start your emergency fund and get rid of some things you don’t need. You will appreciate the extra room in your closets and storage places while blessing others with your unwanted and unneeded items.

Some experts say that in this uncertain job market atmosphere, we need between three and six months’ living expenses in case of a job loss. That would certainly be a good goal to shoot for. Remember that it could take several years to save up this amount of money. Don’t get discouraged and quit saving because it seems like an unreachable goal…keep at it, and it will happen!

Remember that you need to be very discriminating about what constitutes a real “emergency,” which determines if you withdraw from the emergency fund. A great pair of shoes, even on sale, is not an emergency. Only things/services you really can’t live or do your job without, or items that will negatively affect your health and well-being now or in the future, are emergencies. If you lose your job, cut expenses to the bare bones while looking for a new job. The less you take from the emergency fund, the easier it will be to bring it back up to the previous balance once you are able to make regular deposits again.

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