Starting An Emergency Fund

In this day and age, its really a good idea to have an emergency fund. The money set aside for this purpose could be used to pay for unforeseen medical expenses, car repairs or sustain you between jobs. For most people, its a good idea to have 3-6 months worth of pay saved up for emergencies. However, when you're a teen or you're just starting your first job and don't have an emergency fund yet, it may be overwhelming to think about socking away that much money for future emergencies.

The best way to get started is to put aside a small amount from each paycheck into your fund. If your employer offers direct deposit and you receive your pay this way, you can add a second account and have a small percentage of the total taken out and deposited into it. This keeps you from handling or seeing the "extra" money and helps to make you think twice about using it for other purposes.

Now, about that second account we're depositing our emergency fund money into. It could be a second account at your bank, another local bank or an online bank. One way to prevent yourself from being tempted to use this cash for frivolous spending is to either deposit it into a second bank, credit union or an online bank. Look for a bank that offers a good interest rate on its savings accounts. Interest rates vary over time and during economic downturns, they won't be very high, but the money you are going to be saving away for rainy days could be growing and earning interest, albeit even if it amounts to a few dollars, its extra money.

Wait, what!? If you want to be serious about saving money for emergencies, you have to keep yourself from spending it on frivolous things. If the money is kept somewhere other than the bank you use for your checking account (assuming that the majority of your paycheck is deposited here), then it helps make it more difficult to get access to that money for irrational spending. If the account holding your emergency funds comes with its own ATM card, it is wise to leave it out of your wallet and instead store it somewhere at home. This makes it harder to access the money to use it for purchases that you may regret. Now, if you do have an emergency, you won't be unable to get to it. The most difficulty you may have in doing so would be a trip to the bank the money is in, or the time and effort required to retrieve the card from home.