As a new homeowner, you have recently entered an exciting time in your life! Finding a home to call your own, a place to make memories and find happiness, is a joyous occasion. This occasion, though, comes with brand new responsibilities.
Owning a home is a lifelong investment and it is important to be prepared for all the hurdles life will throw your way. It is never too early to begin building your Home Emergency Fund, and if you play your cards right, you may find yourself sitting on a hefty nest egg before too long!
What is a Home Emergency Fund?
Life is known to throw a few curveballs and a Home Emergency Fund is your insurance plan to make sure you can handle whatever comes your way. You don’t know when your family might lose a source of income, or face unforeseen medical bills, or need to replace an old vehicle.
The Home Emergency Fund is enough money saved away to ensure you can make your home payments for anywhere from three months to a full year. As a new homeowner, it is important to take all the steps necessary to protect your future.
What Kind of Savings Account Should You Look For?
Not only is keeping the emergency money under the mattress totally 1950’s, but it also decreases the value of your savings because you do not accrue any interest. When picking an investment option, there are three criteria you will want to look for:
- It should be interest-bearing. This ensures that over time your savings grow with inflation. An emergency fund doesn’t need to make a profit, but it shouldn’t lose value either.
- It should be protected. This doesn’t just mean your savings are kept by a trustworthy agency, but it also means your funds are invested in low-risk investments. You don’t want your Home Emergency Fund to be lost due to tough economic times.
- It should be easy to access. In an emergency you must be able to access your funds. That is the whole point! You want to make sure to invest so there are minimal, or even zero, penalties to withdrawing your funds.
One of the best options is to find a high-yield savings account. These are generally just like normal checking accounts except with an interest rate at or above 1%, which is around one hundred times greater than a normal savings account interest rate!
You can go to your local bank and inquire about your options or you can search online for a bank that best matches you. We do recommend keeping your Home Emergency Fund in a different bank than your normal checking and savings accounts, that way you are less tempted to dip into your funds for a non-emergency.
An excellent option is the Summit Account from Aspiration. Not only will you get a 1% interest rate, but they also donate 10% of their profits to tried-and-true charities across the country.
But, It’s Not Just About the Savings
It’s also about the peace of mind! You will rest easy knowing that your emergency plan is safe in the bank. Emergencies are the most stressful moments in our lives, not accounting for our other responsibilities. A Home Emergency Fund will provide you the ability to focus on your emergencies when they arise, without needing to worry about the future of your home.
We’re certain that by taking the responsible steps you will be able to breathe deep and relax knowing you have everything taken care of. We highly recommend that you begin the process of finding and opening a Home Emergency Fund today, so you don’t have to sweat tomorrow!