Emergency Funds

Everyone should have an emergency fund (EF) but most financial advice is for you to save three to six months of your salary, how does that work with students? Honestly it does not work. For a young student who is living on loans and side income the best thing is to have a small EF and ways to access money. For example, if you are receive subsidized loans for school but have $5000 each semester of unsubsidized loans available to you, figure out how long it will be till you would able to access them and what bills you would need to pay in that time.

When I was an undergraduate I had a small subsidized loan as well work study, a waitress job and access to another $3000 each semester from unsubsidized loans. My school also would loan (in a emergency) an additional $500 to be repaid in a month, however it would take about two or three weeks to get the money. So my emergency plan was put what ever problem on the credit card (fixed rate of 9.9% from my credit union), apply for the $500 no interest loan from school and then apply for the unsubsidized loan of 6.8% (it took about two months because the loans went to the school and then the school cashed the check out to me).

This allowed me to know that if I lost my waitress job I had a plan which is in sometimes better than just cash. I did however put away as much as I could to use in case of a smaller emergency, such as car repair, and rarely had to use it.

Next article will go into where to put that extra cash you can manage to squirrel away.