Setting up an Emergency Account? Automate!

 “E.Q be damned.  I want that _____!  I’ll just double my savings in the next paycheck.”

Does this sound familiar?

Over the past few months,  a few readers have gotten in touch with me, realizing the need to build their 3-6 months emergency fund.  The problem they were facing was how to operationalize this.    We are surrounded by temptation and the increased convenience in which we can get things makes it extremely difficult to exercise restraint.  It is particularly difficult for young families who, come payday, are tempted to head out and treat themselves at the nearest grocery/toy store/restaurant/spa. 

My suggestion is to automate your savings via regular scheduled transfers.  When you make things automatic,  you remove the human element,  making it more difficult for you to mess up.  There are a number of financial institutions such as ING Direct, HSBC Direct and M&T Bank which offer high-yield online savings accounts such as M&T Online Banking with low minimum maintaining balances.  Put you money in the right place.    David Bach,  author of The Automatic Millionaire said it best:  “Not earning interest on your emergency money is almost as bad as burying it in your backyard.”  

What is important is that you do your research now and get your search engine working to find the best high-yielding savings account for you.  Oh, and remember,  in addition to a great interest rate your money should not tied up for a specific length of time, giving you convenient access to your funds.  Otherwise,  it would not be an emergency fund account.  =)

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Motherhood has a very humanizing effect. Everything gets reduced to essentials. ~Meryl Streep

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