Now that I have a plan, I need to stick to it. While that might be easier said than done, I’m going to put my emergency fund in a separate account so I’m not tempted to use it on anything else. The reason most people don’t have emergency money is because they use it on non-emergencies. Creating a separate account (and calling it “Emergency Fund – Do Not Touch”) should do the trick.
I’m also going to invest my savings in a low-risk savings account or ETF. While it’s crucial to keep an emergency fund in an account you can access instantly, it’s also important to not simply stash cash. Inflation may rear its ugly head in the next few years so earning even a little interest can help you keep pace. I’m going to shop for a higher yielding savings account and check out the iShares Floating Rate Note ETF (FLOT) whose coupon payments rise as interest rates increase.
It’s going to be hard to make it a priority, but having the flexibility to bounce back from a financial setback is well worth fewer songs on iTunes. And who knows—maybe I’ll get one less traffic ticket, too.
Jessie Szymanski is a Vice President at BlackRock.
