Create Your Own Cash Safety Net

Even in the most stable of times (great economy, good health, and a steady job) it’s wise to create a cash safety net. Your emergency fund should cover at least six month’s of living expenses. Living expenses include rent or mortgage, debt and car payments, medications, groceries and any other fixed expenses you incur each month. You can get an excellent estimate of your living expenses by keeping a simple budget in a personal finance computer program such as “Quicken” by Intuit.

Your emergency fund should be liquid and immediately accessible. Keep the money in a CD, savings account, or money market account (if you want higher interest). It is not for impulse buying or vacations. You can target the money for emergency car repairs, medical bills, or a short spell of unemployment, but remember to make repayment a top priority.

Look for a bank account with zero maintenance fees. Many banks will eliminate maintenance fees if you maintain a set minimum balance. You can also avoid bank charges by linking a checking account to a savings account or interest-bearing checking account.