Building An Emergency Fund

When I got my first part-time job as a college student, my dad helped me open my first savings account and encouraged me to deposit my paychecks there instead of spending them. When the balance in that account got high enough, he had me transfer it to a money-market checking account that earned a higher rate of interest with no monthly fees as long as I maintained a minimum balance. He also told me to not use that account as my regular checking account to allow it to keep growing.

That emergency fund was my security blanket all through college. I knew that I had enough money to cover a semester's worth of expenses if anything happened. I've tried to maintain that habit of adding to the account on a regular basis. It's easy to forget sometimes, so I started setting a reminder twice a week with Google Calendar. Every other Monday, right after payday, I get a reminder to check my balance. At that point, I'll transfer money from my regular checking account to the emergency fund. Plus my emergency fund is earning interest in the meantime.

I admit that I wasn't always very good about saving money. At one point, I forgot to keep transfering money from my free checking account over to the one that was actually earning interest. I also work with a group of people who are always going out for lunch and getting coffee from Starbucks. I started treating myself to breakfast at a nice restaurance as a reward for getting out the door earlier in the morning.

By cutting back on my expenses and setting regular reminders, I've been able to save more of my actual paycheck to keep adding to the fund. As the economy stalls, I'm looking at several other options, such as creating a CD ladder, in which I invest in CDs that mature at different interval but earn a better interest rate than my money market account. I'm also thinking of switching my primary checking account to one that earns interest as well, now that I've found ones with no monthly fees with a minimum balance requirement that should not be a problem for me. Either way, having that financial security blanket helps me feel better about surviving the economic downturn. If there's one piece of advice I can give people, it's to cut back on expenses and start saving money.