One thing that you can never be sure of in this world is what will happen tomorrow. In fact, we really cannot be sure of what will happen later on today – not even in the next hour. If we could know, then we could also be sure to avoid those things that are not going to be pleasant to us. To help us to be ready for those events, everyone should have an emergency savings fund of some sort – to be sure that they are as ready as is possible.

All of us know that our society is built on the exchange of cash, and this means it is cash that you will need when you are faced with that emergency. Here are some tips about how you can set up an emergency fund – in a savings account.

Understand Why You Need an Emergency Fund

The first step you want to take is to understand what your needs are for emergency funds. If you are like me, you probably never gave it a lot of thought – who wants to think about things like that? The truth is, though, that by spending a little time thinking about it, it will enable you to understand just how important it really is. So – you don’t want to be in too much of a hurry to pass over this section.

Emergencies can take all kinds of shapes. They can range from very simple ones – to those that are almost beyond the imagination to comprehend – like the one that occurred not long ago in New Orleans. Here are a few possible emergencies that are experienced from time to time around this country – all of which you will need an emergency preparedness savings account for if it happened to you:

• Floods
• Earthquakes
• Tornadoes and hurricanes
• Tidal waves
• Accidents
• Medical emergencies or illness
• House fires
• Unemployment
• Emergency travel

Determine How Much You Will Need

Note that in some of these cases, your home could be destroyed. If that were to happen, you would need to be able to have a place to live for a while. If you have a home business, then your income may be destroyed at the same time. You would need living expenses for several months, plus some way to regain an income – whether it means getting new equipment, or just getting a new job.

Another possibility is a car accident. Remember that you probably have to pay a deductible before your car insurance company will pay anything. This means you would need to pay the deductible for everyone on the policy, plus the deductible on your car, before you get a dime – if your whole family is hurt at the same time.

Also, don’t forget that your insurance company probably works on a reimbursement policy, and this means that you will have to pay out of pocket for some time, and then be reimbursed at some point in the future. You will have to have enough money saved to support yourself during this time. As you can see, a safe amount to have in an emergency savings fund would need to be a couple of thousand dollars for a family, but having at least one thousand dollars would be a good starting place for many people.

As a rule of thumb, it is a good idea to set aside at least three month’s worth of income – but six month’s worth is better. If you are self-employed, then it is recommended that you set aside up to a full-year’s worth of income. Besides just saving money, however, a self-employed person should also have a back-up plan to resort to in an emergency.

Put It into Your Budget

After you decide how much would be a good goal for you and your family, you want to set aside an amount each month – in your budget – to build up to that amount quickly. This is a very important item in the budget and should not be delayed – if possible. The main reason is that the damage that can occur to your financial situation can be very serious – and long lasting.

Probably the easiest way to establish your emergency fund would be to have the money automatically go into a savings account for this purpose. This way, you never have to see the money, and you do not need to make any effort to put it into the account, either. After you have the amount you want, let it continue to build up, but take the extra money every few months and either invest it or put it into a retirement account.

Make a Separate Account

You want the money in your emergency fund to be available – but not too available where it constantly runs the risk of getting spent on trivial things. You should look at it like a life preserver – it’s only there for one purpose – an emergency.

When you decide to create an account for your emergency funds, remember that you need to have access to it quickly – it must be rather liquid. Also keep in mind, though, that if a natural disaster takes out your home – that it might also take out the local bank, too. In some rather recent disasters, some people found this to have happened to them. This makes it essential to try and keep your money in a larger bank, and in one that has branches outside of your local area.

You might start out putting your money into a savings account, and then turn it into a CD when you get over $500, or $1,000, in order to gain a higher interest rate. Saving money in a CD will also help prevent you from drawing into it too often since there would be a penalty for early withdrawal.

As you think about creating your emergency fund savings account, be sure to shop around some for

the best interest rates. Banks post their rates online, so it is easy to see what they are offering. Also, find out if there is a monthly service charge for the account – some will give it for free. Here is a Website where you might want to go to start finding which bank has the best interest rates.

Replenish it when Used

If you should ever have to use money from your emergency savings fund for any reason, be sure to start replacing it as quickly as possible. You never know when you may need it. An emergency fund of any kind is only useful if it is there when you need it, so replace the money quickly.

When to Start an Emergency Fund

You may be one of those people who are in debt and you are wondering what to do first – pay off your debt or start a disaster preparedness emergency fund. If this is you – or even if you had not thought of it yet – let me say that you should start an emergency fund right away. Keep on paying at least your minimum amounts on your bills, but definitely put something into an emergency fund now. Emergencies wait for no one, and it will only take one emergency to destroy you financially – especially if you already have debt.