Building an Emergency Fund FOR BEGINNERS | Save Your Money in THIS Type of Account | Jans Life TV

Eventually, a financial emergency will hit all of us. It is in your best interest to save wisely while things are good so that an unexpected expense doesn’t completely take you out later. In this video, I’ll be defining what constitutes an emergency, some of the unexpected repairs I’ve had to deal with as a single mom, and where I recommend that you save your emergency fund. Here’s a hint: it’s NOT in a traditional savings account.

Hello guys welcome or welcome back to my channel my name is jan i want you to win in your finances pay off debt build lasting generational wealth and today i want to talk to you about your emergency fund now i wasn’t really clear on what an emergency fund was up until just a few years ago actually i had a savings account and i knew that it was important to set

Aside money and to save but i really didn’t have a clear purpose for my dollar i was just setting money aside and if i felt like i needed something i would use it if something felt like an emergency then i would tap into that money but i wasn’t really being intentional about it and believe it or not having a savings account and having an emergency fund are not

Necessarily the same things so i want to tell you my take on it but first let’s talk about a savings account this is an account that you can set up at a bank or a credit union there’s not usually a minimum deposit requirement it could be tied to your checking account so say you get your direct deposit from your job for your paycheck and then you have a savings

Account that’s linked to it there’s typically a withdrawal limit on a savings account typically you cannot withdraw more than six times in a month or you will have to pay a penalty fee or if you do it enough your account may be closed there’s usually a little bit of interest that’s assigned to the account and by a little bit i mean a teeny teeny bit maybe 0.1

Percent and they’re generally really good for short-term goals so i do have savings accounts i have one in particular that i call my gift account so i do make deposits to that one every single time i get paid i get paid bi-weekly and i set aside money there and i use it for christmas gifts and birthday gifts throughout the year so that is also what i refer to

As cash flowing if i am setting aside money over time small amounts of money over time with a specific goal in mind like a birthday gift a christmas gift it could be even new furniture if you know how much you want to spend on that furniture you set aside x dollars for x number of weeks x number of months until you reach that total that is what i use my savings

Accounts for some folks also refer to this as a sinking fund and well actually i do have another account that i use as kind of a rotating sinking funds so right now i am saving up to get a new dishwasher because um i’m gonna jump into this in a second but a dishwasher breakdown is not an emergency because i have a sink i have hands i can wash my dishes by hand

I have been washing my dishes by hand so but i do miss a dishwasher so i’m trying to get that right now so that being said let’s jump into what the emergency is behind an emergency fund and i’ve mentioned this in a few videos already but your emergency fund should be put in place to take care of your four walls your four walls are food housing transportation

And utilities so if your hvac goes down if your windows need to be replaced if your car breaks down there is a major repair that needs to take place on the engine or the transmission not if you get a flat tire i do have a post on my blog where i talk about the vehicle maintenance items that you should be budgeting for on a regular basis and i don’t consider a

Flat tire or even needing a set of tires as an emergency we know that vehicles don’t last forever they eventually break down things happen you should be budgeting for those happenings over time but the emergency fund is for you know a true emergency something big you lose your job god forbid and there’s no income coming in but you still need to pay your utilities

You still need to make that mortgage payment or that rent payment that is what that emergency fund is in place to protect your ability to keep making those payments even if there’s no new income coming into your household another way that an emergency fund in my opinion is different from a savings account is i am trying not to touch my emergency fund at all my

Savings account i may go into from time to time i have certain seasons in the year where it feels like my family’s birthdays are all just within weeks of each other back to back so i am taking money out of there on a more regular basis but my emergency fund i don’t want to touch that if i don’t have to if i’m still employed if nothing major is breaking down in

The house if i don’t have a pipe leak under the foundation that needs to be taken care of i am not touching that money it is for an emergency a real life example for me is i did have to replace my hvac pretty recently i think i’ve had my new system for two years now so it has been a little while but because i had fully funded my emergency fund i was able to pay

Cash and by fully funded i mean this since i am a single mom i am the sole income earner for my household i chose to set aside six months worth of expenses and in the last video or a few videos back i talked more about how you can find out what your average monthly expenses are so since it’s just me it’s just my income coming in i opted to set aside six months

Worth of expenses if you are a two income household or if you are maybe a very high income earner again personal finances are personal but the rule of thumb is if you have two or more i suppose incomes coming into your household set aside three months worth of expenses in your emergency fund if you are a single mom or a single person you don’t even have to be a

Mom you might want to look at doing six months or more i’ve seen people do up to a year but again it’s up to you i felt like six months was a nice sweet spot for me so since i did have to purchase a new hvac system i did have to build my emergency fund back up but the beauty of having your emergency fund fully funded even if you have to go into it to take care

Of something like i did for my hvac i was able to pay cash i did not need to go with the company’s financing i did not need to go to the bank to take out a loan i was able to essentially pay cash up front i wrote a check but essentially pay cash up front because i was able to do that i was able to get a discounted rate on the system itself and the labor for the

Install so y’all money talks that’s one of the benefits of having your fully funded emergency fund if something does happen you can negotiate what your installation price is going to be what the labor is going to be you can even maybe look at different models you know there’s different models of different things if you wanted to go to maybe a little bit higher

Tier but pay a lesser cost for it because you’re paying with cash use that it’s in your power to negotiate even if you are getting some sort of financing i would at least try say you’re working on fully funding your emergency fund and you’re not there yet before something happens it doesn’t hurt to try to negotiate anyway but again money talks you have the

Power especially if you’re going to be paying cash so the last thing i want to touch on is where you should save your emergency fund should it go into a savings account should it be invested in the stock market should it go in a high yield savings account so like i mentioned you can put your money in a regular savings account it’s perfectly safe there you’re

Going to be earning a little teeny bit of interest if you put it in there so you are getting something and it is protected you’re certainly not going to be losing any money by keeping it in a savings account as far as the risk of putting it in the stock market is concerned you don’t have to be worried about the ups and downs of the market in case you need to

Access that money another option is to put your emergency fund in a money market account it typically does pay a higher interest rate than a regular savings account and there could be a debit card or a checkbook that’s linked to it and there typically aren’t as tight of a restriction on the number of withdrawals that you can make in a month i have seen this

Type of account highly recommended because of the checking aspect that’s tied to it it is a savings account but you get a checkbook with it it makes that money a little bit more easily accessible when you do need to write that check to pay for a repair now a high yield or a high interest savings account is actually what i recommend and it’s what i use they do

Pay a much higher interest rate than a typical savings account because they are not linked to a physical bank they are online banks so i’ve heard great things about ally bank markets by goldman sachs is another i believe capital one has some sort of online bank associated with it and instead of getting like a point one percent interest rate you’ll see more like

A point five percent or higher and the difference between this and a money market account is that there is no debit card linked to the account so for that reason you will have to factor in a few days to transfer money from that online bank to a physical branch or another means of getting the money out the way that i do it is i do have an account with a physical

Branch and when i get paid i have my money direct deposited to that physical branch and then i will transfer from there to an online bank if i’m starting an emergency fund building my emergency fund back up because i needed to dip into it for whatever reason that’s how i do it you typically cannot open a high yield or a high interest account without another one

At a physical bank another account at a physical bank because there needs to be a link again there’s no debit card or anything like that no atm card linked to your online account so you need to have another account at at least somewhere where you have access to an atm or a checking account or something like that to actually get the money in and out so if an

Emergency does happen you do need to factor in a few days for that money to be transferred to a location where you can actually write the check or otherwise get the money out it’s still worth it in my opinion i feel that the interest that you do get it is a substantial enough difference to make it worth it to go the online the high yield high interest route

That’s what i do i have been doing that for about four years now and i have in a year’s time it’s very typical for me to see a hundred dollars or more in interest earned in that account whereas with my regular savings account where i was getting the 0.1 percent interest it was a good year if i got 15 and again the point is not to touch that money unless we

Absolutely need it so i find that to be very helpful that it’s a little bit harder to get to it’s a little bit more inaccessible because i don’t want to use it for just anything that’s really set aside for a true emergency when i really need the money i’m glad that it’s there and i’m glad that it’s making more money for me so do your research and find out which

Option will work best for you and your family another thing i would advise you to pay attention to are fees and if there’s any kind of minimum deposit requirements at the few online banks that i’ve looked at marcus i believe ally is the same capital one may be the same as well but again make sure you check just in case the rules have changed there is no minimum

Deposit required you don’t have to have any money um not even a dollar to start the account there are some other banks where they ask that you deposit at least a hundred dollars when you open the account also pay attention to fees i haven’t seen many penalties or fees associated with the high-yield accounts that i’ve looked at but you want to know if there’s

Any kind of maintenance fee if they do have limitations to the number of times you can move money around i believe with the high yield it is similar to the savings account as far as the number of withdrawals that you can make in a month you really want to pay attention to that so say for instance there’s god forbid several things that go wrong in your home

And you need to repair the plumbing the hvac and the windows at the same time or pretty close to the same time probably it’s going to take place within the same month make sure that you understand what that total is withdraw the total chunk of money at once so that you’re not caught by going back and forth having to make multiple withdrawals and maybe getting

Caught by needing to do a withdrawal more than that six times because that will limit your ability to keep that account at that same bank so if you have not started an emergency fund already i highly encourage you to get going it’s really so important you build wealth when you’re not slave to somebody else when you’re not owing somebody else this is a way that

You can become your own bank if you have a fully funded emergency fund it’s less likely that you’ll need to take out a loan when an emergency comes up because you know things happen so this is another way for you to be prepared and it doesn’t matter how much you put into your account to get started the point is to save save save even if you can only spare five

Dollars by the end of the month put that in your emergency fund it’s just so important to get started and the little bit adds up trust me it does if you do still have consumer debt student loans credit card loans i do highly encourage you to focus paying that down as much as possible send extra to those principal balances and any extra that you can spare you can

Start your emergency fund with that or at least your rainy day fund i talked about that in a previous video a minimum of at least a thousand dollars it may be a little bit higher could be a little bit lower maybe depending on where you live but have at least a minimum of a thousand dollars saved and then focus on paying down your consumer debt as much as possible

That’s going to free up even more money for you to put toward your emergency fund so tell me in the comments which savings strategy you are going to go with what kind of bank do you think you’re going to use for your emergency fund again i’m using a high yield high interest account over a money market account or a regular savings account there’s really no wrong

Answer you do what works the best for you whatever you’re the most comfortable with again the point is less reliance on loans and credit card companies and more sustainability for yourself i hope you found this video helpful if you have any questions please leave them for me in the comments and i’ll do my best to answer them subscribe to my channel if you haven’t

Already and i will see you guys in the next one

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Building an Emergency Fund FOR BEGINNERS | Save Your Money in THIS Type of Account | Jan’s Life TV By Jan’s Life TV