Why is it important to have an emergency savings fund?
Owning a home comes with a variety of expenses outside of your mortgage payment, homeowners insurance (HOI) and property taxes that could occur at any given time. Escrow accounts can help you ensure that you have the correct amount of funds for your HOI and taxes but having an emergency fund can help you financially navigate through other large, unexpected expenses that arise. Needing to replace an appliance, putting a new roof on your house or repairing your HVAC system are large expenses that many homeowners will face at some point. It can also help eliminate the worry of where your mortgage payment will come from should you become temporarily unemployed.
Putting money away isn’t always easy. Here are a couple tips to help you build your emergency fund:
- Set a goal: the most common recommendation is to have 3-6 months of your total living cost set aside
- Set up a direct deposit through your employer to deposit funds directly into your emergency savings account with each paycheck. This will help ensure you stay committed to building your emergency fund because it is being done automatically with each paycheck!
- Put your emergency fund in a place that is not attached to your debit card. This way you won’t be tempted to use it when you run into “the best sale ever” for the things you don’t really need!
Whether you are saving to buy your first home or just starting to put together your emergency fund, sitting down and reviewing all of your expenses is a great way to show you where you can start saving more, even if it’s just a couple dollars here and there. Making a budget and sticking to it, will help you grow your savings quickly. Consulting with a financial advisor before making any financial decisions is recommended.
