How to build an emergency fund

Trent over at The Simple Dollar explains what, exactly, an emergency fund is:

An emergency fund is cash that you’ve saved up for the sole purpose of helping you maintain your normal life through the emergencies that life hands you. Most of the time, you shouldn’t touch the emergency fund at all – it just sits there earning a bit of interest and waiting until you actually need it. When you lose your job. When an appliance breaks down. When your car needs a repair.

His advice is to start building a healthy emergency fund one goal at a time: start out with $250, then $500, then $1,000. After a while, you can cover whole months, like saving up a month’s worth of expenses, then two, and so on. Six to eight months of expenses is a good goal to have.

How do you get there? Trent recommends even $5 or $25 a week saved in an account you won’t touch. This is where something like a club account or money market comes in handy. Make it automatic, so you won’t be tempted to use that money for something else.

Finally, Trent recommends a bunch of ways to trim that $5 or $25 out of your budget, like eating in more or saving on utility bills.

The point is, bad things happen, and when that something does happen, you should have a healthy emergency fund (anything is better than nothing) saved up to cover those expenses.

Christmas Club $250 deposit winner

Congratulations to Nicole Fausz of Jackson – she wins the $250 deposit into her Christmas Club.

Nicole won by opening up a club account in February and making automatic deposits into it with her paycheck.

“It’s an easy way for me to save for my two kids’ Christmas,” she told me.

Way to go, Nicole!

Frugal tactics to save money this summer

Trent over at the Simple Dollar blog always has great personal finance tips to share. Check out his “Eight Little Frugal Tactics I’ve Learned This Summer” for some pointers on how to not spend a bunch of money, but still have a good time, during these warmer months.

Here’s one we can identify with:

Community festivals can be a very cheap way to spend a summer weekend, particularly ones near your home or ones that line up well with other planned summer trips. Just take along a sack lunch, watch a parade and the other activities (or even participate), and even sample some of the local fare by buying one and sharing it with the rest of your group. Even better, you can participate in events that push you a bit outside your comfort zone and let you try something a bit different than usual.

Great idea, Trent. In fact, we’ll give you a few ideas on some fun, free, family-focused activities this summer. His other tips include no-brainers like growing a garden, using scrap paper for kindling, and actually getting to know your neighbors. Imagine that.

Got gas? Interesting fuel news

Feeling the pinch at the pump? Who isn’t? I just noticed prices went down today to about $4.00 a gallon from $4.15 or so.

SmartMoney lists nine ways to help save on fuel costs, including the no-brainers like slowing down and checking your tire pressure.

But here’s something interesting: some of the old-school gas pumps can’t charge more than $3.99/gallon because of the way they’re designed. Some stations have to charge so much for a half gallon. Weird. Check out the story at the New York Times. The government gives stores the go-ahead to charge by half gallons, “provided they can prove that they have ordered new pump computers that can handle prices up to $9.99 a gallon.”

Ten bucks a gallon?

Tips to get your ‘rainy-day fund’ started

Our parents and grandparents knew the wisdom of having a little bit of cash stored away for a “rainy day.” A decent-sized emergency fund, which can range up to three months of expenses to something simple like $1,000, is a good way to be ready for life’s little uncertainties.

The Consumerism Commentary blog lists 50 tips for you to get your “rainy-day fund” started, including typical items like bringing your own lunch to work instead of dining out, keeping your pocket change in a jar, and cancelling any magazine subscriptions you don’t need. Every little bit can help, and a few dollars each week can add up to a workable emergency fund.

Some of the tips, like drinking (free) water instead of soda, can also help your health.

We can help by setting up a member’s choice account for you, and you can name it your “Emergency Account” or “Pocket Change Account,” or something else that lets you know to keep your hands out of it. Because that’s the key to a good emergency fund: not dipping into it for non-emergencies.