Does renaming the Emergency Fund make you save more?
During my morning blog reading to get my brain ready for some projects, I headed over to one of my favorite blogs and stumbled across a post highlighting something called a Ways and Means Fund. After reading Lifehacker’s take on the this new wording, I headed over to the orignal blog post regarding this new fund to get a little more in-depth informations on it … and it actually makes sense. The idea of an emergency fund is so that you have some money available in case of an emergency (i.e loss of job, medical expenses, etc), however in today’s economy either people: a) think everyday is an emergency or b) never think an emergency will happen to them. In either case they don’t have such a fund. Personally my emergency fund has grown to almost 4 months of pay and it really wasn’t too hard to do. But this isn’t about me, this is about this new idea of renaming the fund to encourage more people to, well, save.
Perhaps the problem with the whole emergency fund thing is that people don’t like to think they’ll have to deal with “emergencies.” It’s not unlike the folks who won’t make a Will because they don’t want to contemplate their demise, or who won’t buy disability insurance because they can’t imagine becoming disabled.
Maybe we’re just calling it by the wrong name. The whole idea of having to deal with “emergencies” can be a real downer. Maybe what we need is nomenclature that sounds far more proactive and positive. We’ll stop predicting disaster and instead focus on the fact that when you have money at the ready, you also have ways and means to deal with whatever life pitches at you.
Again … it makes sense, however in today’s economy how do you go about getting someone to save money when they might have very little coming in.
The best way to create your Ways-and-Means Fund is to set up an automatic deduction from your regular account to a high-interest savings account. If you don’t have much to save, it doesn’t matter — the important thing is just to start…to convert your intent into action. As long as you haven’t started, you’re not creating the means for dealing with what life will inevitably throw at you.
For those who still don’t think they have an extra $1 to put into a Ways and Means Fund, the author goes on to ask how many times you do things such as buy a cup of coffee, one of those supermarket tabloids, grab a few drinks after work, etc. Even though the author does suggest cutting back on some of these, she also suggested just doing a matching-style savings. If you spend $3 on a cup of coffee, then also put $3 into your Ways and Means Fund. Yes this might mean you don’t have enough money at the end of the month to grab the latest US Weekly with that annoying couple Heidi and Spencer on the cover, but personally I think the $3 you put into your fund will do a whole lot more for you in the long run. Seriously … how many staged photo-ops of this couple do you need to see before realizing they are also struggling with money just like the rest of us.
NOTE: I apologize for my rant about the stars of The Hills on MTV, but … nevermind.
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