If a National Emergency Occurs, Here's How Much Cash You'll Need. - Net - Indir

If a National Emergency Occurs, Here’s How Much Cash You’ll Need.

You’ve certainly heard time and time again how vital it is to have a rainy day fund set up “just in case” something unexpected occurs. However, now more than ever, having an emergency fund is essential. The coronavirus pandemic was a perfect example of how something unexpected may have terrible consequences for both the economy and individuals. While we all hope the worst is gone, here’s how to be ready in case it isn’t, as well as how to set up a fund for future national disasters.

Why Do You Need a National Disaster Fund?

Having an emergency cash reserve on hand at all times is an important part of being prepared for any catastrophe, big or little. You’ll need legal cash to buy food, gas, and other basics if you can’t access your funds electronically.

“Whether it’s Mother Nature or another uncontrollable tragedy, you should always be prepared by having some emergency funds on hand,” said Annalee Leonard, president of Mainstay Financial Group and an investment advisor representative. “After a severe storm, banks and ATMs may be out of service for days. Just in case, I advise my clients to have three to five days’ worth of spending money on hand.”

How Do You Know How Much To Save?

To figure out how much to put aside for an emergency fund, ask yourself the following questions:

  • How much will I require in the event of a major disaster?
  • How much money may I set aside?

“Having a little amount of real cash on hand for the truest of situations when banks are closed is a good idea,” said Priyanka Prakash, managing editor of Fit Small Business, a company that finds the best small-business software, services, and financing choices.

Aim for a $2,000 savings goal.

“Individuals should be prepared to pay for necessary or non-discretionary expenses out of pocket,” said Brett Tharp, CFP and eMoney Advisor’s financial planning education consultant. “This category includes temporary lodging or shelter, gasoline, food, water, and necessary pharmaceuticals. This will vary based on one’s level of readiness and assessment of the likelihood of a catastrophic catastrophe.”

Those expenses should be covered by $2,000 in total.

“The rule of thumb I tell my clients is to have $1,000 to $2,000 in cash in case of a national emergency or disaster,” said Gregory Brinkman, head of Brinkman Financial in Tulsa, Oklahoma.

How Much to Save in an Emergency Fund Has No ‘Magic Number’

Despite these guidelines and the advice of some other experts, there is no magic number that you should have in your emergency fund. The best way to determine how much you should save for an emergency is to do what feels right to you. An emergency fund is essential, regardless of its size, so make it a point to develop one.

Even if you can’t save much, Prakash advises that saving something is preferable to saving nothing. So, even if you can only save $1,000 for an emergency fund, it’s better than not saving at all.

The Cost of Covering Basic Needs

Consider that in a national emergency, inflation will rise, demand for essentials will rise, and price gouging will almost certainly occur. With that in mind, you should plan to have enough money set aside, in addition to your regular emergency savings, to cover the following costs in the event of a national emergency:

In the case of a national emergency, gas and water prices will almost certainly skyrocket. The things in the chart are only for one person’s emergency purchases.

An Emergency Kit’s Price

You should already have an emergency kit that includes the following Money.com recommendations:

  • $122 for batteries and tools
  • $48 for a first-aid kit
  • $120 for nonperishable food
  • $38 for medication
  • $44 for extra clothing

What Is the Difference Between a National Emergency Fund and Other Savings?

Unlike a typical emergency fund, which should be used for things like unemployment, medical or car problems, emergency home repairs, or bereavement-related expenses, a national emergency fund should be set up for disasters where credit cards aren’t accepted.

Emergency funds should be kept in a savings, money market, or certificate of deposit account on a regular basis. The majority of your savings for a national emergency fund should be in cash.

“Avoid the stock market,” Prakash said, “because you could lose (your national emergency money) just when you need it the most.”

Neither form of emergency fund is intended to be tapped or spent like disposable money, and building one follows the same steps as building a rainy-day fund, a nest egg, or any other type of savings.

Starting an Emergency Fund

According to Rachel Cruze, author and host of The Rachel Cruze Show and The Rachel Cruze Show podcast, the first step in saving for a national emergency fund is to create a budget.

“The best budget is a zero-based budget,” she remarked. “When your revenue minus your expenses equals zero, you are assigning a name to each dollar. Even if your income has changed or you’ve lost your work, make a list of any potential revenue and all your expenses. This can assist you in determining what can be trimmed from your budget in order to stretch your money farther and save money.”

Set Savings Objectives

It’s time to set some goals after you’ve established your budget and determined how much money you can realistically devote to savings. Many experts, like financial author Dave Ramsey, recommend starting small. If you want to save $3,000 in a year, you’ll need to save $250 per month for the next 12 months. If you extend your goal to 18 months, you’ll save $166 every month.

You can also save a percentage of your salary automatically. “Set away around 10% of your monthly take-home pay for an emergency fund,” Prakash advised.

Make your emergency fund a top priority.

With job uncertainty at an all-time high and stock prices dropping, it’s more important than ever to focus on saving.

“It’s crucial not to panic, but to be proactive in organizing your finances over the next several months,” Chalmers Brown, CTO and co-founder of Due, stated. “I propose reviewing your new budget, taking into account your existing job status as well as any spending cuts. Since you’re quarantined, you’re probably spending a lot less money on gas, eating out, and entertainment. Take the money you would have spent from your bank and deposit it in a lockbox as cash.”

While you’re building your emergency fund, put other contributions on hold.

Limit other savings contributions or debt repayments to only the essential amount while developing your emergency fund, Tharp advised.

“For example, put enough money into your work’s 401(k) to obtain the full corporate match and put the rest into your emergency fund,” he advised. “Maintain minimal payments on outstanding debt to keep loan balances stable while allocating additional funds to your emergency fund. You can continue to donate money to other long-term goals once you’ve saved enough.”

Should your national emergency fund be entirely comprised of cash?

If you’ve managed to save $15,000 in emergency funds over time, for example, having all of that money in cold hard cash sitting around your house might not be the best choice. It’s dangerous for one thing, and it could also be more than you require.

“There is a cost to putting money aside for a rainy day,” Prakash explained. “That cost is inflation, which has averaged approximately 1 to 2 percent each year in the last few years.” “To avoid losing money to inflation, don’t store too much of your emergency fund in physical currency at home. You can at least earn some interest on your money by putting it in a savings account or a certificate of deposit to offset inflation.”

To serve as a national emergency fund, consider opening a separate savings account.

While having up to $2,000 in cash is a good idea in case of a bank failure, the majority of your emergency money should be stored in a bank. Savings can be multiplied over time by putting them in an interest-bearing checking account or a high-yield savings account.

“When you put money aside for a vacation or an emergency, you want to be able to get to it quickly but not keep it somewhere that’s too simple to get to,” said Chris Hogan, author, financial consultant, and host of The Chris Hogan Show. “Your funds are safe in a bank. The Federal Deposit Insurance Corporation (FDIC) insures bank deposits up to $250,000. A money market or savings account is the greatest place to keep your emergency reserve. It’s great if you want to keep some cash at home, but I wouldn’t advise cashing out your savings.”

Consider putting some money aside in other assets.

“Regardless of the crisis, cash remains king. As a result, you’ll want to make sure you have enough cash on hand in case you need to buy some needs “According to Jason Powell of EstateInvesting.com, a real estate and securities attorney. “However, you might want to consider trading part of your cash for silver, gold, or other assets that could be valued next year or in the near future.”

Where Can I Hide Money at Home?

For fear of robbery or misplacement, many people are hesitant to retain substantial sums of money in their homes. Cash is dangerous to keep at home, especially in high denominations. If your cash supply is stolen, you won’t be able to pay for a home break-in because actual money isn’t insured and is unlikely to be recovered. Consider it like creating a bank within your home: finding safe and inventive places to stash your emergency fund helps protect your assets.

The general consensus is to keep some cash on hand, but not too much. Prakash recommended that the $1,000 cash amount be held in small denominations at home.

“Small bills, such as twenty, are preferable because certain businesses will not accept larger amounts,” she advised.

When it comes to storing your money in a compact manner, larger bills in smaller quantities take up less space, so it’s up to you. Whatever you choose, put your money aside in an unconventional but practical method.

“If you have cash at home, make sure it’s in a good, fireproof safe,” Hogan advises. “This is safer than the typical suspects: under the mattress or in the coffee can! Keep the amount you put in the safe to a minimum. It’s fine to keep a few thousand dollars at home, but I recommend keeping the majority of your money safe and secure at a bank.”

Other Alternatives to Hiding Your Cash

Additional alternatives for securing your emergency cash include:

  • You have an aspirin bottle in your medical cabinet.
  • A book that has been hollowed out
  • A framed photograph’s cardboard backing and the photograph itself
  • Encased in waterproof plastic and buried in your backyard or a potted plant’s soil
  • Hidden in the freezer among frozen items, enclosed in a plastic sandwich bag

Why Having Cash on Hand Is a Good Idea in an Emergency?

If circumstances prevent you from withdrawing cash from the bank, cash can be your best defense against a national catastrophe or tragedy. It’s similar to insurance in that you pay for it in the hopes of never using it. The suggested hiding spots could keep your cash safe in case an emergency arises unexpectedly.

What to Do If You Don’t Have a National Emergency Fund Right Now

This advise may be a little late for some folks. Many people have already lost their employment and are finding it difficult to meet their basic needs. If you don’t have a national emergency fund and are in this situation, it’s critical to understand how to prioritize your spending.

“Right now, the expenses that should be your priority are the ones you need to exist,” Cruze explained. “Whatever money or income you have should go toward paying for the ‘four walls,’ as I call them. Food, utilities, lodging, and transportation are all included. If you’re having trouble feeding your family, eliminate anything that isn’t absolutely necessary, such as subscriptions or cable. Right now, needs take precedence. But, crisis or no crisis, never utilize debt to pay for unexpected expenses! Debt will only make things worse. Find more ways to earn money if you’ve lost your work. Amazon is planning to hire 100,000 staff. Food delivery services, grocery shopping services, grocery stores, and online education are all in need of assistance right now.”

Consult Your Lenders

If you have outstanding debts that you are unable to pay due to a job loss or a reduction in hours, and you do not have an emergency fund to cover these gaps, contact your lenders immediately. On top of your other financial worries, you don’t want to have to worry about fines and costs for missed or late payments.

“Call your lenders and ask if you can skip payments without penalty,” Cruze advised. “Many businesses provide grace periods. The President has announced a 60-day moratorium on student loan payments. If you’re in a tight spot, take advantage of these opportunities to save as much money as possible.”

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