Saving For The Unexpected: Emergency Funds

Luck favors the prepared. While it's great to put away money for a long-awaited vacation and holiday presents for your loved ones, it’s also important to have an emergency fund for sudden expenses that may arise. The unexpected can happen to anyone, making an emergency fund an especially crucial savings goal. Catherine Comerford, Assistant Vice President Financial Wellness Coach at Workers Credit Union’s Fitchburg location, has tips for saving for the unplanned life events in your personal finances as well for your business.

• Allocate funds from your paycheck into an emergency fund before bills. An emergency fund is money set aside for a situation that will affect your typical cash flow during the month, like being laid off, prolonged illness, or taking care of a loved one. This account should be considered a priority. Thinking of the fund as a weekly, bi-weekly or monthly expense before other bills will ensure it’s a priority in your savings goals. If you decide to allocate $200 a month to the account, you’ll end up with over $2,000 in a year in case of an unexpected life event. Emergency funds are not just beneficial for individuals. Small business owners also need to save for unknown events, like water damage from a storm. The total savings goal for an emergency fund should be 6 months’ worth of bills/ expenses. Designating money for your emergency fund before paying your bills will provide relief for when those situations arise.
• Keep your emergency fund separate from other savings accounts. This separation will help distinguish your accounts according to your financial goals and make sure you only use the funds when you really need them. In addition, the account should be accessible and have a high rate of return. Workers Credit Union offers a few different savings account options that can work for emergency funds, like Accelerate Savings where members can keep their funds liquid and still earn a high rate of return.
• Do your homework. Educating yourself, whether that be through a financial coach, a friend, or on your own, is a great way to find the best account for your personal or business financial goals. A Workers Credit Union member doubled the $15,000 she saved in one year by learning about interest rates and making her emergency fund a priority. She’s not alone. Compounding interest and picking the right type of account can make all the difference in your savings.

Everyone can benefit from saving for the unexpected. Consider speaking with a certified Financial Wellness Coach who can provide individualized one-on-one financial wellness coaching to help you achieve your goals including setting up an emergency fund.