One of the steps in the “getting our of debt plan” is to set aside $1000 as an emergency fund. What exactly is an emergency fund? Well, it’s your hedge against Murphy’s Law. As you try to get our of debt emergencies will occur. Car repairs, medical, etc. The emergency fund covers those incidents and prevents you from using credit cards. So what do you do with your emergency fund? Money Market Account?
You put it in a Money Market Account. The reason you put it in a Money Market Account, and not a saving or checking account, is you want to limit access to your money except in an emergency. Money Market Accounts give you a little better interest rate than checking or savings account and you can only write a couple of checks a month.
Money Market Accounts are usually not tied to debit cards. We have put our emergency fund in our local bank’s Money Market Account and we rarely even remember it’s there. When we do think about it we feel a sense of relief knowing that should Murphy hit us, we can take what we need from our Money Market Account.
So go ahead and do your best to save an emergency fund. For some of us it’s $1000 for others it may be $500, whatever the amount just make it a priority to save it and stick it in a Money Market Account. You’ll be glad you did.
Regards.
2 responses so far ↓
1 Russell’s Financial Blog » Blog Archive » Investing Early // Sep 23, 2005 at 11:02 am
[…] This is one of my first goals before I go to college next year. I want to set up an IRA along with a Money Market Account. I currently bank at Washington Mutual and according to their website, there is a $1000 minimum contribution requirement to start an IRA, however, I often notice that they have promotions at my local branch where if you are 19 or younger they will allow you to invest with a lesser amount. […]
2 Administrator // Sep 23, 2005 at 3:54 pm
Russell,
My hats off to you for having the smarts to start early. I am 45 and if I new at your age what I know now I would already be a millionaire. It’s never too late to start so I did. But you have lots of time to take advantage of compund interest and retire very comfortably at an age early than most.
Best of Luck, keep up the good work.
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