Protecting Your Emergency Fund
One of the cornerstones of any budget or personal financial plan is to have an Emergency Fund. For many, the hard part isn’t so much starting the Emergency Fund as it is leaving it alone.
It can be easy to let life get in the way. Perhaps you have begun putting money away for one reason, but find yourself needing to spend it on something more immediate like a car repair or a new boiler for your house. Even if you’re saving for something specific rather than a general emergency, it can be a real challenge to stop yourself from dipping into your Emergency Fund.
While a strong mindset is the most important element when it comes to leaving the money where it is, here are some tips to help you avoid tapping into your Emergency Fund.
Make contributions non-negotiable Make a commitment to yourself that you’re saving this money for a reason and therefore the funds should stay locked away. If you need to discipline yourself further, consider locking your money away in a 1-year bond or certificate of deposit so you are protected from yourself. But make sure that you can access the money in an emergency if you really need it. Most restricted access deposit accounts let you access the money if you need it — albeit for a fee or forfeiting any interest you may have earned. Paying a fee might not sound smart, but if it protects your money from your self-sabotage, then it can definitely be worth it.
Don’t just save — invest While you might not want to invest all the money in your Emergency Fund, the act of investing – not just saving – some of it can help you appreciate that the money is earning and growing, and the reward of seeing it grow in value over time might be fulfilling enough to prevent you from wanting to cash out.
Don’t call it an ‘Emergency Fund’ Most people don’t respond well to the negative emotion caused by the thought of an ‘Emergency.‘ Switch it to a positive and refer to it as your ‘Opportunity Fund.’ Subtle difference, perhaps, but the name can get you more excited to contribute knowing you are saving for an opportunity rather than a disaster.
Care Nothing very tricky or earth-shattering about this tip. Just care enough about yourself and achieving your goals and ambitions that you won’t let money issues hold you back.
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