Home & Family
AUBURN UNIVERSITY, Ala. – April is financial literacy month. This time of year is set aside for people to reflect on their finances and make steps toward improving them. A great way to make improvements to finances is by starting an emergency savings account.
In Case of Emergencies
As the COVID-19 pandemic has proven, there are times when unexpected financial situations present themselves. Having an emergency savings account in place can make a world of difference for individuals and families. An emergency fund can not only cover unexpected expenses but it also gives people a peace of mind knowing that they have it in place for these financial emergencies.
“Not having an emergency savings fund is the reason many individuals borrow too much money at high interest rates through payday loans and other cash traps,” said Theresa Jones, an Alabama Extension human sciences regional agent.
Setting Up an Account
It is best to keep emergency savings in a credit union or bank savings account. These accounts offer easy access to the money when people need it. Some financial institutions require a minimum of at least $100 to open an account. Likewise, they may also require a $200 minimum balance to avoid monthly fees. However, according to Jones, this is not often the case.
“In most areas, several financial institutions have lower minimums,” Jones said. “In addition, banks and credit unions may waive the minimums if you already have other accounts at the institution.”
Other ways to save money include certificates of deposit (CD), U.S. savings bonds and mutual funds. Using these can make it more difficult to access the money because of the maturity date of six months or longer normally associated with these methods.
A great way to successfully build an emergency fund is to include the entire family on the task. By working together to cut back unnecessary expenses and saving where possible, the entire family can become more money conscious.
“After you have explained the importance of emergency savings to your spouse or children, they may get involved in helping to cut expenses on energy bills, food expenses, entertainment and more,” she said.
The Alabama Extension publication 103 Ways to Save Money is a great resource for families to follow all year long.
For more information on creating an emergency savings account, visit the Alabama Extension website www.aces.edu or contact your county Extension office.