Feed me my pennies!!!


Keep your money safe with a proper emergency fund.

Everyone needs  an emergency fund whether you’re in debt or not, whether you make a lot of money or not. College students are not exempt from it. Bad things happen and usually it is at the worst possible time. An emergency fund can gilave you some control over your situation.

Here are some frequently asked questions about emergency funds, if I left anything out, then please let me know. If you have any tips or stories about building and using an emergency fund, please share them.

How much do I need?

Ideally you should have 3-6 months of expenses in your emergency fund. The key is to look at essential expenses like food, rent, gasoline, etc. This does not mean movie tickets, bar money, etc. If you have high interest debt, like credit cards, then tuck away $500-$1000 away first then go ahead and pay that debt down as fast as you can. Build up the emergency fund to the point that if you lose your job, you’re not immediately having a meltdown.

How can I save for one?

Here’s a reprint from my post, Easy Ways to Get an Emergency Fund Started:

  • Look at your package deal for cable, phone, and Internet. Sometimes the deal they advertise on TV isn’t the best deal. Call your cable provider to see if they can give you a better rate. It works sometimes, but if they don’t, then consider cutting back on the cable package for a month or two, just to get your emergency fund started. You may not notice a big difference and keep the change. Either way you can save $30-50/month for this and that’ll help with your fund.
  • Examine your cell phone plan. Can you change your plan? With Alltel you can change it without getting an extension on your contract. I’m sure about the other plans.
  • Look at your land line plan. It didn’t make sense for my husband and I to have a land line AND our cell phone plans. So far, so good. If you must have a land line and a cell phone, you may want to take off long distance with your land line. More and more people are ditching the landline. You may want to find the best cell phone plans in your area, pick one that suits you and make it your primary phone line.
  • Compare insurance companies for auto insurance rates. I saved $50 a month on car insurance for the same amount of coverage. Shopping does pay off. Just make sure you’re given a policy that can comfortably cover you and your situation.
  • Go during happy hours when you decide to eat out. I know that many college students hang out as a part of the cultural, so it would be impractical to tell you stop going out, but at least save money while you’re there. There a great place down the street that offer 50% drinks and has 50 cent tacos. So we plan our eat outs around that time (4pm-7pm). It’s still just as fun, but a lot cheaper.

The article also gives a step by step process of automating your system.

Lynnae at Being Frugal also has some ideas on building your emergency fund when money is tight:

    • Use financial windfalls to build up your savings. Tax returns, inheritance money, unexpected gifts…..when you receive “extra” income, deposit it straight into savings. It’s tempting to want to blow the extra, but don’t do it. You will feel much better knowing you can afford to have the car repaired if it breaks down.
    • Snowflake toward your emergency fund. Do online surveys for a little extra cash. Sell a few things on eBay or Craigslist. Sell your books on Amazon or half.com. You could even pledge to only spend paper dollars. Put any change toward your emergency fund. There are lots of ways to “find” extra money.

Where do I put my emergency fund?

Put your money into a high yield savings account. I keep my emergency fund at ING Direct. There are several other banks like Emigrant Direct and HSBC Direct. The point is that you’ll put your money somewhere where it will grow faster since it has higher interest rates than at a conventional bank. You don’t want to be risky with your emergency fund, so that’s why you wouldn’t invest in stocks with that money. You also need it easy to access in case of an emergency. You need keep it apart from the account that you spend. You want this money to grow undisturbed.

Can I Use My Credit Card For an Emergency Fund?

NO!!!! If you’re depending on your credit card to bail you, then you have a financial problem.

What qualifies as an emergency?

Basically an emergency fund is for an unexpected expense that will ruin your budget. This is something that is necessary, ie. Your car broke down and you need it repaired so you can go to school and work. Tapping into the emergency fund for a concert that you just found out about and didn’t save for already is not an emergency.

Photo Credit: Cliff Johnson