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Building — or rebuilding — your emergency fund

Don't neglect your "Plan B." Prepare for the unexpected by beefing up your emergency fund.

Your car breaks down. You have an unexpected medical bill. Your water heater goes kaput. Time to panic? Not if you've built up an emergency fund. This rainy-day account can help you shrug off financial surprises.

"An emergency fund can relieve stress in the event of the unexpected," says Douglas R. Peete, ChFC®, owner and financial representative at Douglas R. Peete & Associates in Overland Park, KS.

Fortunately, that's already become a priority for many people. Sixty-six percent of participants have an emergency fund, according to the Principal Financial Well-Being IndexSM survey. The same survey found that 83 percent of participants who use a financial professional have emergency savings in place.*

Create or boost your emergency fund with these pointers:

Understand your options. Emergency funds come in different forms, including:

  • Standard savings accounts
  • Liquid investments
  • Other interest-bearing accounts such as money market funds, "breakable" Certificates of Deposit or reward checking accounts

Regardless of which route you take, "it's wise to have easy access to your money when you need it," says Peete.

Start saving. Peete recommends having three to six months' worth of your income in savings. Not there yet? Remember: Anything is better than nothing. Every bit counts toward reaching your goal.

Practice discipline. Keep your rainy-day dollars in a separate account. You'll be less tempted to use the funds for nonemergencies. "Once you put money away, keep your hands off it," says Peete.

Keep adding to it. Just as important as starting and building the account is knowing how to maintain it. Whenever you need to dip into your emergency funds — or if you deplete them completely — start rebuilding as soon as possible.


Build your rainy-day fund

Emergency Fund Calculator Try our emergency fund calculator

Find out how much you might need to save with our "How Much Should I Set Aside for Emergencies?" calculator.

Meet with a financial professional Meet with a financial professional

Find out how a financial professional may be able to help you prepare for the unexpected by building a rainy-day fund.


* This Principal Financial Well-Being IndexSM survey was conducted online within the United States by Harris Interactive on behalf of the Principal Financial Group® between April 25 and May 3, 2012 among 1,135 employees.

Douglas R. Peete and Douglas R. Peete & Associates are not an affiliate of any company of The Principal®.

While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that none of the member companies of The Principal or its representatives are rendering legal, accounting or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

Insurance products and plan administrative services are provided by Principal Life Insurance Company. Securities are offered through Princor Financial Services Corporation, 1-800-547-7754, Member SIPC and/or independent broker dealers. Securities sold by a Princor® Registered Representative are offered through Princor. Princor and Principal Life are members of the Principal Financial Group® (The Principal®), Des Moines, IA 50392. Certain investment options may not be available in all states or U.S. commonwealths.

© 2013 Principal Financial Services, Inc.

t13032903mn – 04/2013

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