Money Management
FOR
IMMEDIATE RELEASE: December 24, 2007
FOR PEACE OF MIND, CREATE AN EMERGENCY FUND
Your car breaks down and you
need repairs immediately. You or a loved one has a medical
problem and there are related expenses that aren’t covered
by insurance. Or, you can’t work temporarily because of an
illness or injury.
Do you have enough money available to pay for unforeseen
expenses in a crisis? The best way to make sure you do is to
set up an emergency fund that you can tap into when the
unexpected happens, according to the North Carolina
Association of CPAs.
START
SMALL
To get off to a good start, don’t get overwhelmed by the
idea of creating a fund to cover all your expenses for any
contingency. Instead, pick a reasonable amount that is
manageable for you to set aside every week.
ESTABLISH
A REGULAR SAVING SCHEDULE
Stick to your regular deposits. If you save as little as $5
a week, you’ll be amazed at how quickly cash can add up once
saving becomes a routine. If you do need to tap into the
emergency fund, remember to pay yourself back. You can do
that by increasing the amount you save each week until you
have replenished the account. If that works, try to keep
saving at that higher level as long as your budget allows.
SET A
REALISTIC GOAL
How much money should there be in your emergency fund?
Experts recommend that you have from three to six months of
expenses in reserve just in case you lose your job. If that
sounds impossible, don’t be discouraged. The most important
step is starting with small but steady deposits. Pick a
small goal—maybe $500 or $1,000—and aim to have that much by
a certain date. Once you’ve achieved that, set a new goal.
If saving six months’ worth of expenses sounds impossible,
then aim to save enough for several months’ worth of
expenses.
LIMIT
ACCESS
You should be able to access your emergency cash readily
when a crisis occurs, but if the money is too easy to get,
you may end up using it for unintended purposes. Don’t
accumulate the money in your checking account, for example,
where it can easily be siphoned off for everyday expenses.
Instead, open a separate interest-bearing savings account
for your emergency dollars, and resolve to leave them
untouched until you really need them.
DEFINE
“EMERGENCY”
Determine what you mean by “emergency” and stick to your
definition. For example, you may decide you’ll only use the
money for medical emergencies, if someone in the family
loses a job or is unable to work or in the event of an
accident or disaster. Establish in advance that finding a
great deal on a beach vacation is not an “emergency.” You
can always set up another “splurge fund” where you save
money for indulgences.
DON’T FALL
BACK ON YOUR CREDIT CARDS
Many people use their credit cards to pay for necessities in
a crisis, but this is a costly way to cover your needs. You
will have to pay interest on the debt rather than earn
interest on your emergency cash in an interest-bearing
account.
WORK WITH
YOUR CPA
No matter
what goal you choose, creating a plan and sticking to it are
the best ways to get there. Your CPA can help you understand
the financial emergencies you might face and the best way to
save for them. Contact your CPA today for advice on these
and other financial questions.
Produced
in cooperation with the AICPA.
©2007 The American Institute of Certified Public Accountants
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