Why Have a 2nd Backup Account

Posted on | December 10, 2008 | Leave a Comment

Security and stability seems to be the buzz word right now in this period of recession. There could be a number of things that can happen that could literally send your well meaning budget plan down the tubes.

It is a very good idea to always be ready for something unexpected.Â It might be a job lossÂ orÂ major medical expenses. Whatever it is, you have to be ready when things like that happen. You will have money when you need it without having to take a loan.

Get a Plan

Have a plan, that’s the best thing you can do right now. You have to work it into your budget now. You may have to make some changes to allow for that extra money. What you want is to prepare a second savings.

This second savings is mainly for emergency use only. You want it to contain enough money that could support you for at least three months if all other income were gone. Once you reach that goal you can start contributing to the main savings and let the second savings account sit and gain interest.

Never take any money out of this account and if you do, make it as a ‘loan’ from this account and be sure to ‘pay back’. Remember, never take money from the second savings unless absolutely necessary. You may even want to stipulate conditions for the account so everyone knows when money may be removed.

One of the biggest mistakes with savings accounts is that people think they can repay the money and take money out with never actually repaying. Then when the money is really needed it isn’t there. Savings accounts are not meant to be spent, so do not use either savings account unless you must do so.

A Word About Saving

Many people fail to save at all. You probably have a savings account as part of your personal finances, but many people do not even have that. If something like a car repair were to pop up you could probably use money from the savings you have been building. However, if you do not have a savings then you may be in trouble.

Additionally, if you failed to save at all then you do not have the extra money and have to find a way to work the expense into your budget. That can be quite hard since most people have a tight budget with little extra cash on hand.

Getting yourself to save may be a challenge. Making excuses about why saving is impossible is common. The point is that you have to push excuses aside and realize the benefits of saving. No matter how little you may be able to contribute to a savings account, in the end it will add up.

Get Started

It’s never too late to start saving. If you have one savings then start planning for a 2nd account and keep it as an emergency account. Have it included into your budget. Even if it is only a few dollars each month, at least you will be started on the way and that is half the battle.

Just remember the benefits of having extra money saved back. No one wants to be hit with huge, sudden expenses so with a good savings you have the power to prevent that from happening just by starting to save today.