Preparing for the Unexpected

As much as we’d like to have total control over our daily lives, costly emergencies sometimes happen. Natural disasters cause unexpected home repairs. Surprise bills arrive from health care providers. Drivers experience car accidents that require pricey body work.

While such pitfalls can wreak havoc on your budget, having ready cash on-hand can ease the burden on your bank account and your peace of mind. So called “rainy day funds” help you absorb a one-time blow to your monthly budget, such as unanticipated car repairs or health care bills, while larger “emergency funds” help you weather big life events, like the loss of a job, or damage to your home due to a hurricane, flood, or other natural disaster.

“It’s really important to get into a regular habit of saving,” says Jim Chaffin, Bank of St. Francisville CFO and Executive Vice President of Operations. “If you don’t, you might get caught with unexpected bills and not have the ability to pay them.”   

A good rule of thumb for creating an emergency fund is to put away three months’ worth of your regular salary. You should be able to access it without significant penalty or delay.

 “Three months is usually recommended because in that time, it’s reasonable to think you could find another job, or right the ship on a big expense,” Jim says.

While it might seem hard to stow away that much cash, there are small steps you can take today to make it feasible, says Jim. Don’t be discouraged if reaching your goal amount takes a while; any amount of saving is an accomplishment, especially when you allow the funds to keep growing.

Automatic deposit is your friend: “Sometimes the best strategy is to set up your savings routine so that you don’t have to think about it,” says Jim. Many Bank of St. Francisville customers who have employer direct deposit divert a portion of their paycheck into their savings accounts. Customers also can opt to divert a portion to a Christmas Club account so that holiday expenses don’t become a financial burden.

Savings Made Simple: Bank of St. Francisville’s Savings Made Simple program is also a great way to save cash without thinking about it, says Jim. The program allows customers to round up their everyday debit card purchases to the nearest $1, $5 or $10, and automatically deposit the difference into their BSF savings account of choice.

Home Equity Line of Credit (HELOC): A Home Equity Line of Credit or HELOC can be a lifesaver when you need ready cash, especially for big emergencies. With a much lower interest rate than a credit card, it’s a good vehicle for pulling down cash to pay for home or auto repairs, or to pay off high interest credit cards. “Opening a HELOC requires having equity in your home, and is also based on your credit score,” says Jim. If you have had a HELOC in the past, it’s a good idea to keep it open in case you need it in the future.

Reboot your budget: Saving may be easier than you think if you take a hard look at your budget. Trim unnecessary expenses, find vendors who can give you a better deal and think hard about what you can live without. Add these monthly budget savings to your rainy day fund. 

Put your tax refund to work: If you’ve overpaid your taxes this year, save your refund instead of spending it. “It can serve as a great boost to your savings account,” says Jim. And if you usually owe the IRS come tax time, reexamine your withholdings to see what adjustments can be made to ensure you won’t owe in the future.

For more information about saving for emergencies, call us at (225) 635-6397 or click here to make an appointment. 

Further Reading