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Dealing with Financial Emergencies

Financial Emergencies 

The following scenario may not have happened to you, but I am fairly sure you know someone that has gone through something like this.

A single mother just paid her rent last week.  This morning, as she got ready to start her day, her car wouldn’t start.  The car is fairly old, with lots of miles.  She knew it needed some work, but didn’t have the money to have it repaired.  But, now, she’s in a pickle.  If she can’t get to work, her job is in jeopardy.  She gets a ride with a friend for today.  But, what about tomorrow?  What about the car?  Tap the savings account?  What savings account?  Use the credit card?  What credit card?  Maybe do a payday loan . . .
Being financially strapped is not limited to single mothers.  Many people have money problems.  Almost all of us have a “money glitch” occasionally that we did not anticipate or that we knew was coming, we just didn’t know when.  Perhaps it’s a car problem, as in this case.  Perhaps, it’s a hot water heater or a dental expense. The range of things it COULD be is endless.  The question isn’t whether these things will happen.  The question is - how to plan for them?  

At FHFCU, we have thought about this a great deal, because so many people are affected by financial emergencies.  And, the cost of even a relatively small emergency can be significant.  Payday loan fees.  Letting other bills slide to cover the emergency.  The stress!!

We have three programs aimed at helping members avoid the negative impact of minor financial emergencies.  

EMERGENCY FUND ACCOUNT.   All the experts agree you should have one.  They don’t agree on how much.  Our rule of thumb is at least one month’s expenses.  For some people, though, that amount is difficult to save.  If you cannot do a month’s expenses, do $500. In our experience working with members, $500 covers a wide range of small emergencies.  We have a special, limited access account, specifically for this purpose.  By saving $40 every two weeks, you would have $500 saved in six months.  

CREDIT CARD.  Not everyone can qualify for a credit card, but we are strong believers that, if you can, you should have a credit card for emergencies.  Credit cards can be costly, too, of course, if you carry a balance and pay finance charges on the account.  But, if you have the card tucked away somewhere just for an emergency, it costs you nothing (at least a FHFCU card costs you nothing).

BORROW TO SAVE:  This is a unique way of creating an emergency fund.  Borrow $500 or more from the credit union.  We put the money from the loan into your emergency fund account and you make payments on the loan.    The biweekly payment for a $500 loan over six months would be a little less than $40.  The money in the emergency fund account becomes available after your loan has been paid in full - to be used for an emergency when one comes up or for you to keep adding $40 to every payday to grow the balance.  For many people, it’s easier to make a loan payment than it is to save the money.  If this is you, Borrow to Save could work for you.  How much interest would you pay us on this kind of loan?  About $5 on $500 over 6 months.
We believe in planning ahead for emergencies we know are going to happen.  We may not know when they will happen.  We may not know exactly how much they will cost.  But, we all know that cars need new tires and brakes and alternators.  We know appliances need to be repaired, kids need things and, unfortunately, funerals sometimes need to be attended.  At FHFCU, we want to help minimize the negative impact of emergencies.  If one of our programs makes sense to you, please contact us and we will be happy to help.