Credit: Karolina Grabowska via Pexels
Your financial portfolio might be missing some important savings funds. Read ahead to find out what savings funds should be in there:
1. An Emergency Fund
An emergency can happen at any time. Your car could get a flat tire in the middle of your morning commute. Your roof could leak and send rainwater spilling into your attic. You could accidentally lose a dental filling during dinner.
All of these emergencies cost money to address, and they can’t be ignored. You can’t abandon your car on the road with a flat tire. You can’t leave a hole in your roof. And you certainly can’t go on without replacing your dental filling — otherwise, you might need a root canal or tooth extraction in the future.
This is why you should have an emergency fund. An emergency fund is a collection of personal savings reserved for urgent, unanticipated expenses. You can withdraw the necessary savings from your fund and cover one of these expenses immediately.
Without an emergency fund, you will have limited options for handling an urgent, unanticipated expense. You could use your credit card as long as your balance is nowhere close to your set limit. Or you could apply for a personal loan online. If you’re approved for the loan, you could use the borrowed funds to manage the emergency and make repayments later.
If you’re considering a loan as a solution, you should search for options that are specifically available in your home state. So, if you live in Santa Fe, you can consider loans through CreditFresh in New Mexico— these may be accessible to your location. You don’t want to waste your time filling out applications for loans that aren’t available in New Mexico whatsoever.
2. A Retirement Fund
You don’t want to end up close to retirement age without anything in your retirement fund. Statistics show that a whopping 17% of American adults between 45-59 years old had no retirement savings in 2020. Even more shocking is the 13% of adults that were 60 years old and up with no savings.
This is not a position that you want to be in. You don’t want to give yourself a handful of years to build a significant nest egg.
So, it’s time to start putting together your retirement fund. The earlier that you get started, the more you’ll have set aside for your golden years. How can you start?
- If your employer offers 401(k) matching, take advantage of the opportunity to get more out of your contributions.
- If you can’t get a 401(k) through an employer, open up an IRA.
- Don’t make early withdrawals from your retirement accounts. This will whittle down your savings and result in penalties.
3. A College Savings Fund
Do you have kids? Do you expect that they’ll go to college once they’ve graduated from high school? Then, you should start collecting savings in a college fund as soon as possible — even if they are still too young to tie their shoes on their own. In the same vein as your retirement fund, the earlier that you start working toward this goal, the better.
Get started by opening a 529 plan — this is also known as a qualified tuition plan. The tax-advantaged savings plan will help you save up for your kids’ future tuition and related educational costs. If you don’t want to open a 529 plan, consider opening a high-yield savings account. The interest rate attached to your account will help your tuition savings grow over time.
Don’t go without these savings funds for another day. Start putting them together right now!