Financial planners recommend saving 3-6 months of living expenses for an “emergency fund.” An emergency fund should be exactly that, for emergencies only. It should not be a savings account that you tap into when you find a great suit, beautiful dress, or need some extra spending money for a vacation.

So What is an Emergency Fund For?

An emergency fund should be set aside so your financial situation is not destroyed by unexpected events, which inevitably happen to all of us. A loss of job, a medical emergency, or major home repairs are a few examples. You want to be sure that you are prepared for unforeseen circumstances and don’t have to rely on a high-interest loan that can drive you deep into dept.

Where Do You Put Your Emergency Fund?

Don’t just stuff the money under your mattress. Put it to work for you, but make sure your emergency fund is in a separate account than your regular bank account. This will prevent you from being tempted to spend this money, as it is out of site out of mind.
While it may be unlikely that you have to use your emergency fund, you don’t want to tie it up in an investment that doesn’t allow you to quickly access it in the case of emergency. For that reason it is best to put this money in a high-yield online savings account, which will allow you to quickly access the cash when you need it most.

A high-yield savings account will give you the best return on your money while making it accessible at any moment. By stashing your money here, you can either quickly transfer your cash to your regular checking account or use an ATM card supplied by the online banking account when you need it. Other investments, such as a CD or mutual fund, could come with early withdrawal penalties, heavier tax implications, and could take a couple days to close the account and transfer the fund to your bank account.

What if I Don’t Have an Emergency Fund

Start saving now. Unless your income greatly exceeds your expenses, building an emergency fund will take some time. The little bit of money (or lot of money) you can contribute to your emergency fund piggybank every month will add up faster than you realize.

You might need less than you think. Remember, an emergency fund is 3-6 months of minimal living expenses, not what you typically spend every month. If you were in a real crisis, what is the least amount of money you would need to survive. This would include your rent/mortgage, utilities, food, and other bare necessities.

Millionaire Money Habit: Having an emergency fund is an intelligent way to anticipate for the unexpected, while reducing the chances of having to go deep into debt because you were unprepared. It’s important you do not tap into your emergency fund for unnecessary purchases, and that you find a way to keep it accessible and earning interest while your money sits dormant. -RT
photo by billy_verdin

Special thanks to David and My Two Dollars for the opportunity to be interviewed and introduced to his readers. Welcome My Two Dollars readers!

Spotlight: Gather Little by Little quotes Dave Ramsey, “Many times that when you start following a budget, it’s like getting a raise,” in his Top Reasons People Don’t Budget. What reason do you have for not budgeting your money?

Other Great Personal Finance Reads:

• 6 Simple Financial Tools at The Wisdom Journal
• 20 Ways To Earn More and Spend Less: Steps To Becoming A Frugal Capitalist at the Digerati Life
• 3 Unstoppable Budget Busters at Prime Time Money
• Labor Capital, The Forgotten Asset Class at Moolanomy
• 10 Signs That You Should Cut Up the Plastic for Good at Mrs. Micah
• The Debt Snowball at Plonkee Money
• How Much Money Is “Walk Away From It All” Money? at The Simple Dollar
• What Would Warren Buffett Do? at Get Rich Slowly

Personal Finance Carnivals:

• Carnival of Personal Finance
• Money Hacks Carnival
• Carnival of Money Stories
• Carnival of Financial Planning

Millionaire Money Habit: To build wealth, you need to perpetually improve your financial literacy. Digest as much information as possible and stick to a plan that works for you. In addition to the articles above, pick up one the recommended books found at the footer of this website, and be sure to subscribe to the RSS feed or by email to be notified of new articles.

Now that you have some ideas on how to start making money when you are young (read How Can Kids Make Money When They’re Young), you have to get customers and keep them coming back.

Here are some suggestions on how to make sure your business makes a lot of money and maybe become like one of the Teenage Millionaires:

Visit Craiglist: Craigslist.org is a great website to find people looking for help, or you can post a free ad about your services. Be sure to talk to your parents before talking to strangers or going to anyone’s house.

Create Flyers: Create a flyer about what you can do, and post them around town at grocery stores and laundry mats. First, get permission from the store before you hang the flyer though.

Offer Discounts: Give people a discount the first time they hire you to get more calls. Another option is to offer a discount for packages. For example, you can charge $10 a car wash or discount 4 car washes for $30.

Give Stuff Away for Free: People love free stuff, and if you give them something they really like they will come back. Do your first job for your customer for free, or partially for free. Here are some things you can do for free to get people to come back: clean half a basement, bake smaller sample brownies, walk their dog the first time for free, give 1 free car wash.

Follow Through on Your Word: Always do what you say, and do it to the best of your ability. If your customers are not happy, you run the risk of them telling other people not to hire you.

Always Ask Your Customers Who Else They Know: If your customers are happy, they will let other people know about you and your business. Ask them if they know anyone else that they would be interested in your service or product to help you make more money.

Tell Why: People like helping other people. Mention why you are trying to save money in your flyers and when you talk to people. Don’t just tell them you are trying to make money. Tell them you are saving money for a trip, or to buy something, or to help someone out.

Many of the rules above apply to kid businesses and professional lives. Create a brand and differentiate yourself from the pack, and you will be successful. -RT
photo by rochelle, et. al.