By Tim Sullivan
When a costly emergency strikes, is your first instinct to pull out your credit card? If so, you may want to consider the benefits of building an emergency fund.
Creating an emergency fund is a vital step toward becoming a responsible credit card user. A credit card can be the perfect tool for many financial situations, but confronting large, unanticipated expenses isn't one of them. Even if your interest rate is low, monthly interest charges can still add up quickly. But a well-stocked emergency fund can prevent the need to go into debt when sudden events force you to reach for your wallet.
What is an emergency fund?
An emergency fund consists of easily accessible assets set aside -- typically in a bank account separate from your normal funds -- to be used only in the case of an emergency. It's not for movie tickets, vacations or video games. It's only for vital, unforeseeable expenses that are not part of your normal monthly budget.
What counts as an emergency?
Simply put, it's any unexpected, essential expense that your budget can't handle. Whether it's a sudden job loss or an accident that injures you or a member of your family, your emergency fund is there to help you cope with difficult times.Read the full article »