I apologize if my post topics are a week late, I am a bit late processing this stuff. Several bloggers have touched upon this subject, all making good points. In light of current events, you can see how emergency funds are important. What if your ‘really stable’ job turns into rubble? At the same time, your house is underwater, and your car is an aquarium. Your online savings account is going to be a bit hard to access without electricity. Even something in a safety deposit box isn’t so safe. I like to think of emergency funds as Real Life Insurance, protecting your current way of life, not protecting against your death. So I’d like to brainstorm different ways of having some backup money first. In no particular order (more like stream of consciousness):
1. Cash – I usually keep less than $200 of cash in the house, but I’m definitely going to put more in the house. No electricity = No ATMs and No credit card swiping machines.
2. Liquid Savings/Checking Accounts – Of course not all emergencies involve loss of power, and having thousands of dollars in cash under your mattress is not going to earn you any interest. And it’s FDIC/NCUA insured.
3. Credit Cards – Theoretically, I could buy an RV with the limit on my credit cards. Somehow Mr. Visa and Mrs. Mastercard trust me that much.
4. CD’s or Savings Bonds – You’ll lock up your money for a longer period of time, but you’ll earn more interest. With most CDs you can break the CD and just lose some interest, but with Savings Bonds you can’t cash them in for 12 months no matter what.
5. Home Equity Line of Credit – For those who own homes with some equity, you can take out a line of credit against your house with a pretty nice rate. The great thing about this is that most times if you don’t borrow anything, you don’t pay anything. Perfect as a backup for emergencies if you have self-control not to use it.
6. PayDay or Title Loans – I’d probably sell my car before getting a high-interest loan using my car as collateral, but it is an option. Same thing with the borrow-$100-today, pay-me-$125-next-week PayDay Loans.
7. Those credit card checks you get in the mail (and clog up my shredder) – These are treated basically as cash advances, but may be useful for places that don’t take credit cards. Maybe I should keep a couple…
8. Personal Property – You could always try to pawn or sell off your jewelry, electronics, or even furniture I suppose. I visited some pawn shops in Las Vegas a couple years ago and I saw a used hairdryer for sale. Sad.
Well I think that’s it for now. Gimme more ideas! Every time I see the people staying in stadiums, I feel sad. Although many of those people are so poor that they can’t even start an emergency fund, I’m sure some of them could have. I know I wouldn’t want my family to have to endure that.
By Jonathan Ping | Insurance | 9/14/05, 9:20am