Preferred Financial Services discusses the importance of an emergency fund…

Andover, Massachusetts August 4th, 2010 - If this depression has taught us anything it's that the unexpected can happen. Millions lost their jobs unexpectedly over the last 3 years while countless more saw their home values plummet to a fraction of what they were just a few short years ago. With the dramatic drop in American wealth, families are reconsidering their personal finances just like the US government is seriously looking at reforming their spending habits. An emergency fund is the backbone of any sound financial family but there is a lot of false and misleading information regarding them.

For many Americans the concept of an emergency fund is relatively new. Throughout the last decade, the national savings rate was close to 0%, meaning we as a society were saving almost nothing of what we earned. As the depression took hold in early 2008, Americans began changing their spending and saving habits and thus the country saw a huge rise in the popularity of "Emergency Funds". So, what is an emergency fund? It is money dedicated specifically by a family or individual to make sure that if the unexpected happens that they would not lose everything or ruin their finances for the long term. Emergency funds typically consist of 3-6 months of living expenses and are meant to hold over an individual or family until normalcy returns to their lives.

While they are popular, emergency funds can also be abused and mishandled very easily. The most common abuse of them involves spending the cash on a non emergency. Getting a new TV or placing the down payment on a new car is not an emergency! Make sure that you use your emergency fund only when you have to. Ideally, the fund would not be accessed unless a medical issue arises, your car needs a major fix or a job loss happens. In those cases, the emergency fund is meant to keep the household afloat while the situation returns to normal. In the past people used to use credit cards as an emergency fund. The rise in interest rates and the overall high cost of credit card debt has made this less desirable in today's economy and thus people are turning to emergency funds. This is a much needed change and should have happened years ago. While 6 months may seem short to some, it can also be considered too long by others. It is up to each individual to decide how large the fund should be, but all that matters is that the household is protected from the unexpected.

So readers, do you have an emergency fund? Is it a certain number of months of expenses or just a flat number? Have you needed it over the past couple of years or do you continue to rely on credit cards?

Preferred Financial Services is a debt reduction firm certified by the CFC (Center for Financial Certifications) and accredited by U.S.O.B.A. (United States Organizations for Bankruptcy Alternatives). Headquartered in Andover, Massachusetts, Preferred Financial Services has been a leader in the debt reduction industry since 2003. Preferred Financial Services has acquired some of the best experience in the industry over the past 7 years. In 2009 alone Preferred Financial Services reduced over $16.5 million worth of consumer debt for just $6.4 million, for a savings of about 60%- and over 2,900 accounts were settled on behalf of their clients.

For more information, please visit www.pfsdebtrelief.com or follow us on our blog at www.pfsdebtrelief.com/blog/ .

Contact:
Stephan Tavernini
Marketing Coordinator
Certified IAPDA Debt Arbitrator
Preferred Financial Services
stavernini@pfs1.net