Learning how Important Emergency Savings Are

There are accounts in the papers and on TV shows like Oprah where people talk about what they felt like when something terrible happened to them. When it's something to do with the health of a family member, or when it's a terrible accident that burns their house down, or when they are in a situation where they think they're going to die, what is the first thing that flashes through their minds? If you believe that their instant first thoughts went to the pain and suffering involved, you'd be dead wrong. People only think about how they would need lots of money to get out of the problem and how they don't have any. This little piece of insight should help people see even if nothing else can make them do it, that emergency savings are extremely important. They have to be more important than anything on Earth is, if it is the very first thing that flashes through your mind when there is a catastrophe.

Let's first get out of the way, what exactly you would define as emergency savings. Basically, it's a good substantial general-purpose fund that can cover practically anything that is known to happen in life right from your glasses breaking at an inopportune moment to a tree falling down on your house, from your car getting stolen, to a burglary. An emergency fund needs to cover everything.

Now emergency savings need to exist in two forms liquid short-term funds and long-term funds that are not liquid. When there is an emergency, you want at least a reasonable reserve of cash that you can access at a moments notice. You'll probably want to set up a bank account with an ATM card and checking facilities so they can access the funds involved in every possible way. You want to keep this card and checkbook with you to use, say, when your car breaks down, when your refrigerator packs up or when you meet you have a healthcare need.

A long-term emergency fund on the other hand doesn't have to be liquid. It needs to be placed in conservative investments like bonds. This is what you go to when someone loses their job for when there is a major problem like a hurricane that destroys your house.

So how much should you put into your emergency savings? Before the financial crisis cropped up four years ago, experts recommended that you needed to have enough put by to survive three months without a job or anything. These days, things are so bad and disaster seems far more possible than it ever used to. Enough put by to survive nine months (the average time it takes to get a new job these days) is what they recommend today. If you have a lot of debt on the other hand, you could cut it down to perhaps $3000 and do your best to get rid of your debt first.

Building emergency savings can be hard. But you need to think of how hard it can be when something happens and you don't have money. Just take it out of your hands and instruct your bank to transfer money to your emergency savings account at the beginning of each month. Take the decision out your hands. Take every penny you can find to spare and put it in as well. Just remember that when something happens, the first thing that goes through your mind is "Oh God, I have no money!"

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