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The best way to avoid a bad financial outcome when emergencies happen is to start an emergency fund. Aim to begin by saving a small amount each month. If you can manage it, $25 per month is a great place to start. If you have to begin with less than that, that’s okay. The important thing is to get in the habit of putting something aside and leaving it there.
Open a separate savings account where you can deposit your emer- gency fund money. If you have direct deposit set up for your pay- check, have your bank transfer the monthly amount you want to add to your emergency fund directly into your savings account from your paycheck, even if it’s only a few dollars. That way, you don’t have to think about it. Your emergency fund will grow on its own. And then don’t touch it. It’s ONLY to be used for real emergencies. A trip to the spa to cheer you up after a hard week doesn’t qualify as an emergency.
2 . Goal-Oriented Savings
A goal-oriented savings plan is a plan you start when you want to save for a specific purpose. Examples of goal-oriented savings include sav- ing for a new car, a new couch, a new dress, a trip you want to take, or even a down payment for a house. This should happen after you’ve already built up a good emergency savings fund. That means you’ll have to set a goal for your emergency fund. You decide what that will be. Some advisers suggest $1,000 minimum, others suggest enough to cover expenses for six months in case you become unemployed. Think about the emergencies you’ve encountered in the past that you have had to pay for with a credit card or by borrowing from someone. Think about what kind of shape things are in around the house, your car, emergencies the kids might have. Now determine a realistic goal for covering these emergencies. The goal may seem overwhelming at first, but it won’t take long to realize how much better it is to have the money to pay for things as they happen.
Once you’ve reached your emergency fund goal, you could then begin putting that monthly amount into your goal-oriented savings fund.
Financial Tips for Single Parents 5