Emergencies happen all the time, most noticeably, when you’re ill-prepared. Whether it be your car breaking down, your basement flooding, or a health issue, these things happen every day across America and many are unprepared monetarily to fix the problem – which is usually an expensive problem. So how can one save up for that emergency fund?
Building an emergency fund is not a fun way to use your money, but it is necessary if you want to make it through life unscathed by high-interest debt. When you are retired, it can be even harder to pay for an emergency on a fixed income. That being said, there are some best practices when it comes to building up an emergency fund, retired or not.
- Save your Change
This has been a cardinal rule of my dad’s since the day I received my first piggy bank. He would always tell me to save my change for a rainy day. Whether it be to put gas in my tank or pay for a flat tire. You’d be surprised how much you have after a year – or even a few months – of tossing your change into a jar.
- Designated Savings Account
Open up a low-cost savings account at any bank and select a small portion of each month’s pay to go into this account. If your checks are automatically deposited, you can have the amount automatically drawn into the savings account. That way you won’t event know it’s gone. Keep the account separate from any of your other bank accounts, so you won’t be tempted to draw from it unless in an emergency.
- Retirement Option: Reverse Mortgage
Now I know what you might be thinking, something along the lines of, “Is this guy serious? Recommending a Reverse Mortgage for an emergency fund?” Yes, yes I am. The truth of the matter is the Reverse Mortgage program is great for future needs. The Reverse mortgage line of credit is a great option for this. Just because you start the line, that doesn’t mean you have to draw from it. You can start a line of credit and never draw from it. At least the money will be there when you need it. And any unused money in the line increases in value over time. You only pay back what you spend (plus interest). Even if you do not ever use the money, at least you will be at ease knowing it is there when you need it.
Each one of these financial tips can be helpful with jumpstarting an emergency fund for down the road. It is imperative that you start sooner rather than later just to insure yourself against something bad happening. Get that emergency account started so next time you have an emergency, your finances don’t add to the stress of the emergency.