Updated: Mar 1, 2022
What is emergency savings and why is it important? Emergency savings is the money you have available to help you cover unexpected expenses or urgent situations that need to be paid for right away. Life happens and unfortunately it sometimes puts us in situations that requires us to spend money outside of our everyday budget to cover the expense. When that happens, we want to be able to tap into our emergency savings to pay for the expense without having to borrow money to make the payment and therefore putting us more into debt. It is recommended that emergency savings should cover three to six months of monthly expenses. This might be a challenge, but the key is to get started.
You may be thinking that emergency savings is just money sitting idle waiting for something to happen. Now why would I want to have money waiting for an unanticipated event when I could be doing something more fun with my money?
If your emergency savings is tucked away somewhere at home or generating little to no interest in one of the traditional big banks like Bank of America or Chase, then your thinking might be correct. However, if your emergency savings is kept at a high interest yielding online savings account, now your savings becomes part of your wealth-building. High interest yielding savings accounts pay 50 times or more interest than the big banks. Big banks offer 0.01% interest on your savings whereas a high yielding online savings account pays 0.50% or more depending on which account you choose. Typically, it is not directly linked to your checking account; therefore it is better suited to be used for the unexpected emergencies instead of everyday use. Additionally, the money is insured by the federal government (FDIC) the same as the big banks. That means your money is protected up to $250,000 per depositor per account.
Here is an illustration of the difference in the interest rate to help you build your wealth:
I don’t know about you, but I will take $50 over $1 every day. Now that’s what I call wealth-building.
Learn how to build an emergency fund by watching this short video.
There are many safe and secure online high interest savings options from which to choose. Paycheck to Wealth is here to assist you and help you on your wealth-building journey.
Now’s the time to schedule your free no obligation review to discuss your situation and see where Paycheck to Wealth might be able to help.