Do you have an emergency fund?

In these times of economic uncertainty, it is a wise idea to have an emergency fund. Experts tell us that we should have a fund balance of at least 3 months worth of expenses. This fund is not a savings account and should be used only in extreme emergencies (unexpected bill, job loss, layoff, or other unexpected emergency). Having this set up before you might need it will afford short term protection for your credit rating and assets.

Here a few tips on setting up this fund:

1. Make sure that you have easy access to the cash. If you keep it in a high yielding online money market account, be sure that you are able to access it readily. Keep in mind that you might need this money in the event of an environmental disaster (Katrina), so you need to understand how you might be able to access the cash without internet access or electricity.
2. If you are lucky enough to have saved some money, then set aside some now to establish this fund. If not, then consider using your tax refund. Other ways to fund the account would be through the sale of things that you have but don't use anymore.
3. Find an account with a good yield, but don't let the rate be your only driver; remember that you need easy access to the funds.
4. Fund the account with an automatic savings plan

Here is a video found at Smartmoney.com that talks about these tips.

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