Build an Emergency Fund Tip #3 - 5 Financial Tips for Young People
Retirement Planning Financial BehaviorTranscript
Hi everyone, this is Ivanhoe Sánchez and in this video we are going to talk about how to properly prepare an emergency fund.
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If you haven´t seen the previous two videos, please go back and watch videos number 1 and number 2 first, so you have a full picture of our video today.
Life happens. You need surgery… your transmission goes…you lose your job. Enduring these hardships is bad enough but having them derail your financial future adds insult to injury. Luckily, that’s a situation that can be avoided, if you have an emergency fund.
Preparation is key for financial wellness. And that’s why Tip #3 is: Prepare for the unexpected with an emergency fund.
This is a great idea, and it’s necessary. But how do you make it happen? Here are some steps to think about:
First you need to gather all your bills and expenses together to figure out about how much money you spend each month. A general rule of thumb is to have an emergency fund that covers six months' worth of expenses. You don’t need to replace all your income, just need to have enough to cover the essentials.
Second, find a place to keep the money; ideally you need a place to be easily accessible – but not so easy that you can take spur-of-the-moment withdrawals.
Third. Start saving, but start small. The thought of having to come up with thousands of dollars might be overwhelming. Concentrate on getting that first thousand under your belt.
And finally, treat funding this account like a monthly bill. Just like you do your rent, with your car payment, and your credit cards. Remember, this account is for unexpected events.
If you follow these simple steps, building in an emergency fund should become like second nature, and you can give yourself a pat on the back when you see your financial stockpile add up.
In the next video we are going to cover spending habits and responsibly using credit. Until then, let’s connect if you have any questions about how to facilitate the creation of an emergency fund.