5 Emergency Funds That Will Prepare You For The Unexpected
5 Emergency Funds That Will Prepare You For The Unexpected
Jaycee Tenn Mon, October 19, 2020,
If there is anything that 2020 has made glaringly apparent, it’s that the future is a series of unforeseeable events. This unpredictability has reinforced the importance of financial security, putting an immense amount of emphasis on savings.
In mid-2020 the amount of money held on credit cards in the U.S. hit $413.7 billion, according to an annual report from NerdWallet. Within each American household, the analysis estimated the average credit card debt to be $6,124.
Planning for the unexpected ahead of time is essential in keeping you away from credit card debt. And one way to help keep you out of the debt cycle is through emergency funds.
An emergency fund is a way to save for a specific expense by adding a certain dollar amount to that fund every month. The goal of an emergency fund is to gradually build your way to a certain expense so that by the time it comes to put the money down, the burden or worry of spending a large amount all at once dissipates.
So, in contemplating what unexpected expenses you should save for, below are 5 emergency funds to consider.
Car Insurance & Repairs
While car insurance may not be an unexpected expense, it is a sizable one. The average cost of car insurance in the U.S. is $1,348 per year. Whether you have a yearly or six-month policy, having to put down that amount of money at once is never ideal.
Going off the average amount, try setting aside $112 a month into an emergency fund, so that by the time that bill rolls around it won’t feel overbearing.
This could also be extended into other car expenses such as maintenance and repairs. Adding a small dollar amount to your monthly emergency fund, in addition to your insurance payment, could provide extra money for costs such as tires, brakes, or a new transmission.
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