Saving up an emergency savings fund can make a huge difference when a financial crisis occurs. Even if you are already on a tight budget, it does not mean you cannot slowly build an emergency savings fund. Start small and go from there. Start with the small goal of saving up $100. Once you hit $100, go for $200, and so on.
Pros of an Emergency Savings Fund
- Provides peace of mind for when financial emergencies occur.
- Your money earns interest and is safer and more secure at your bank.
- The cash is more liquid and does not require selling stocks or bonds.
- It is easy to make cash withdrawals or transfer it to your main checking account.
Cons of an Emergency Savings Fund
The only drawback to having an emergency savings fund is it can be tempting to dip into it for other reasons like that much-needed vacation, to pay down credit card debt, or to invest it for a higher yield return.
Even you are tempted to do these things—don’t. The whole purpose of an emergency savings fund is to have easy access to cash to pay bills or take care of other unexpected expenses like a new hot water heater for your home.
If you find yourself in a financial emergency and do not have enough set aside in your emergency savings fund, you could use part of the equity in your home with a cash-out refinance. To learn more about refinancing your home and converting equity into cash, please feel free to contact Elite Financial at (800) 908-LEND or (805) 494-9930 today!