Emergency spending, at some point in our lifetime, we all will have unexpected expenditures. Owning a home and an old car, I know I will have to shell out money for something every now and then, so every pay day, I deposit funds for emergencies here.
It is a good idea to walk through the house and think about what needs to be replaced periodically and how much it costs. For example, this summer I needed a new water heater. When I purchased my home, I immediately started to save for a new one. I knew I would need one within the next two years (but it lasted three!). I researched how much a water heater costs with installation, broke the payment down into 24 payments ($33 a month), and had saved the money when it started to leak. After the purchase, I still deposited $33 in addition to my regular deposit. I always replace the money I use, so I never have $0 in the account. Out of all the savings accounts, I never have less than $500 in this account.
Make your first savings goal to save $500 for an emergency fund and not touch it.
Depending on your income, you may qualify for grants or no or low interest loans. The City of Philadelphia, for example, has various programs, including one for home repairs that offers loans for 0-3 percent interest, depending on income. If you are in the Philadelphia area, look to the city‚Äôs webpage for information:
http://www.phila.gov/ohcd/homerepairprograms.htm. I recently had a client who received a new water heater through a PECO program for low-income homeowners. (PECO is an electric and gas utility company in the Philadelphia area. Check with your local utility company.)