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06.22.2020 / Budgeting « Back to all articles

Budgeting Emergency Fund vs. Savings
Emergency Fund Savings Jar

Savings or Emergency Fund? 

Saving seems like a straightforward concept.  But that term encompasses so many specific ideas within it, and all of them seem important.   

The emergency fund is always a common recommendation, but does it differ from a regular savings plan?  The short answer is yes, but it is worth working through the details to understand both savings and emergency funds to learn how to work the budget in order to accommodate both options. 

 

Emergency Fund Best Practices 

An emergency fund is just what it sounds like: a fund set aside in case of emergencies.  An account or any other deposit of money not to be used except when an emergency occurs remains vital in every household.  Don’t dip into an emergency fund in order to cover a fun weekend.  In an ideal world, an emergency fund would never be spent.   

There needs to be specific rules in place for a fund to determine when it can be used.  For example, is it for medical or automotive emergencies only, or is it more fluid than that?  Emergency funds typically range from around $1,000 to several months of expenses. 

 

Savings Best Practices 

A normal savings plan differs from an emergency fund, although the two can overlap.  A savings plan exists to put money aside for the future – whatever the reason.  When an emergency fund is used, for example, the savings money would be used to fill it up.   

However, several things, such as vacation, retirement, or college may spur a savings account.  Many experts recommend putting between ten to thirty percent away in savings.  Put that money into a savings account that will provide a return on your investment. 

 

How to Navigate the Budget for Both 

A budget must be in order and priorities set before beginning an emergency fund and savings plan.  After that, leave it alone. Fill the emergency fund up as soon as possible to a certain predetermined level.  Then, fill the savings account up with the same budget category until it reaches a determined point.  A great example is maxing out a 401(k) for a year.  Then when finances are more stable, increase the emergency fund.   

How much money that goes into each fund is up to the individual.  In theory, a year’s worth of expenses makes an excellent emergency fund.  Once the emergency fund fills up, put the savings money into those various categories (college, retirement, etc.) unless the emergency fund is used.  Then replenish the spent money and start again.  

07.02.2020 / Borrowing

5 Good Signs You Can Afford More House
Moving on Up  Buying your first house is a huge milestone, but it’s often not the “forever home”.  Most people move…

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06.22.2020 / Budgeting « Back to all articles

Budgeting Emergency Fund vs. Savings
Emergency Fund Savings Jar

Savings or Emergency Fund? 

Saving seems like a straightforward concept.  But that term encompasses so many specific ideas within it, and all of them seem important.   

The emergency fund is always a common recommendation, but does it differ from a regular savings plan?  The short answer is yes, but it is worth working through the details to understand both savings and emergency funds to learn how to work the budget in order to accommodate both options. 

 

Emergency Fund Best Practices 

An emergency fund is just what it sounds like: a fund set aside in case of emergencies.  An account or any other deposit of money not to be used except when an emergency occurs remains vital in every household.  Don’t dip into an emergency fund in order to cover a fun weekend.  In an ideal world, an emergency fund would never be spent.   

There needs to be specific rules in place for a fund to determine when it can be used.  For example, is it for medical or automotive emergencies only, or is it more fluid than that?  Emergency funds typically range from around $1,000 to several months of expenses. 

 

Savings Best Practices 

A normal savings plan differs from an emergency fund, although the two can overlap.  A savings plan exists to put money aside for the future – whatever the reason.  When an emergency fund is used, for example, the savings money would be used to fill it up.   

However, several things, such as vacation, retirement, or college may spur a savings account.  Many experts recommend putting between ten to thirty percent away in savings.  Put that money into a savings account that will provide a return on your investment. 

 

How to Navigate the Budget for Both 

A budget must be in order and priorities set before beginning an emergency fund and savings plan.  After that, leave it alone. Fill the emergency fund up as soon as possible to a certain predetermined level.  Then, fill the savings account up with the same budget category until it reaches a determined point.  A great example is maxing out a 401(k) for a year.  Then when finances are more stable, increase the emergency fund.   

How much money that goes into each fund is up to the individual.  In theory, a year’s worth of expenses makes an excellent emergency fund.  Once the emergency fund fills up, put the savings money into those various categories (college, retirement, etc.) unless the emergency fund is used.  Then replenish the spent money and start again.  

Need a
Loan?

Loans from $120 to $15,000. Get funded as soon as today!

07.02.2020 / Borrowing

5 Good Signs You Can Afford More House
Moving on Up  Buying your first house is a huge milestone, but it’s often not the “forever home”.  Most people move…