(StatePoint) — April is Financial Literacy Month, a time dedicated to teaching Americans how to establish and maintain good financial habits at any age. The month provides a good opportunity for people to assess whether they have a solid plan in place to support financial goals, and that means planning for emergency expenses, too.
The best time to plan for unexpected expenses is before they happen. One strategy is to open an emergency savings account to stash cash specifically for unexpected expenses or short-term savings goals. This prevents having to pay for these expenses with a credit card and incur interest.
Regardless of financial circumstances, a rainy-day fund offers peace of mind and if well planned, it won’t derail other long-term savings goals.
To get started, consider these ideas from Ally Financial Inc., which offers personal finance tips, tools and education through its Wallet Wise financial literacy program:
• Create an account specifically for emergencies: Many make the mistake of assuming that a standard savings account can also serve as a rainy-day fund. However, dipping into savings when the roof leaks, may not be the best solution. Start an account just for emergencies. Some banks, such as Ally Bank, will allow clients to create “nicknames” for the accounts to reinforce their purpose.
• Specify amount to be allocated: Set a goal for the fund that could cover most emergencies with a little extra to spare. Determine how much would realistically be needed if an emergency were to arise.
Set up a recurring transfer or direct deposit to automate savings. If money is tight, decide how to cut corners to make the plan work.
• Fee free is the way to be: Maximize savings potential by finding a bank that won’t charge a monthly fee or charge for dipping into the emergency fund. An account that earns a competitive interest rate or one that is compounded daily will allow an emergency fund to grow faster on its own.
• Ensure access to the funds: Many money market accounts come with checks or a debit card to ensure quick access to pay a locksmith, plumber or roofer directly without needing to run to the bank.
For additional tips, visit allywalletwise.com.