I don’t know what it is about the headlines, but they’ve been consistently bad for the last three years. First, it was the Covid-19 pandemic ruining the economy, and more recently Russian President Putin has been threatening nuclear war with the west. Now the Fed is raising interest rates which threatens to undermine the economy.
In short, things are looking pretty risky right now. You might be thinking its time to start saving a bit more.
So, if you’re looking to stock up your emergency fund, here are some guidelines that might help.
1) Shoot for 8 months of living costs. You want 8 months of savings because during the last recession it took at least 8 months for people to find new jobs if they got laid off. Having 8 months of savings will give you peace of mind.
2) Put the cash in a Federally insured bank or credit union. What you want to do is check the banks website or the door of the bank to see if it says FDIC, or NCUSIF. These acronyms stand for the Federal Deposit Insurance Corporation and the National Credit Union Share Insurance Fund respectively (here, and here). If your financial institution fails, these programs cover up to $250,000 of your money.
3) Don’t risk the money. I used to put my savings in the stock market – which was a mistake. Back in 2008, some of the stocks I put money into lost 90% of their value. So, if I had lost my job during that time period I would have been stuck. So, instead of putting your money into something risky, like stocks, or bonds, just put it in a savings account and accept the fact that you’ll lose a bit of money from inflation.
4) Be careful about the type of account you get. The FDIC and NCUSIF only insure deposit accounts. If you buy into a mutual fund or open a brokerage account through a bank or credit union, you won’t be covered if you loose money. Only deposit accounts at banks or credit unions are covered.
5) Don’t loan anyone money if it comes out of your emergency savings. Most people’s natural impulse is to help others. But don’t lend or give anyone money if makes a substantial dent in your emergency fund. You don’t want to jeopardize your own financial health.
So there you have it, five things to consider if you’re stocking up your emergency fund.
Need Money For Your Emergency Fund?
Incidentally, if you want a painless way to get some extra money for your emergency fund, consider selling your spare bandwidth. There are at least three good companies in the space worth trying:
Packetstream => Pays about $5 per month.
Earn App => Pays about $5 per month.
Pawns.App => Pays about $5 per month.
These are easy. You just install the software and, check the totals periodically and make withdrawals.
For more on stocking up your emergency fund, consider reading:
Save, Invest and Reinvest To Build Wealth
Stack Cash, Low Cost Ideas To Get Extra Money
Hat tip: Suze Orman’s Dos And Don’t Of Money.
Disclaimer: Some of the links in this article are affiliate links. If you click on them and download or use the products, Dinksfinance will get a commission.
James Hendrickson
James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.
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