Money for Emergencies

by Dennis Perry on September 24, 2011

To borrow a line from Charles Dickens, It is the best of times and it is the worst of times.  We live in an era of unprecedented opportunity for wealth creation and limitless avenues and tools to use for this purpose.

I don’t think it is a stretch for anyone to also agree that we live in very troubled times, not just in the US but all over the world.  Our economies are struggling, real estate values are falling, we are on the verge of a double dip recession or worse, our 401(k) s have become 201 (k)s.  If you haven’t done this already, now is the time to begin preparing for things to get worse.

In future articles I will discuss a few simple but powerful money management systems.  In this article, however, I want to discuss just one aspect of money management; having an emergency account.

There are a number of opinions about how much to have set aside for emergencies.  I believe that you should start simple.  You can always expand from there.  Some people say you should have 6 months of expenses saved up while others suggest 1 year.  I am a fan of 6 months as a baseline but it doesn’t have to stop there.

Far too many of us have nothing set aside at all so we just need to start somewhere.  If you have not started then start now.  Take a portion of your weekly, bi-weekly, or monthly earnings and set it aside.  I would love to see you put at least 10% of your net (after taxes, take-home pay) aside.  If you can’t do 10%, then start with 5% or whatever you can but start with something.

Separate this money from the rest of your money.  I recommend an ING Orange account for this purpose.  It pays a significantly higher interest than your bank will in most cases and it is easily accessible by linking it to your checking or savings account.  There are no fees and no minimum balances to keep.

Again, I believe 6 months worth of expenses should be your target but if you have nothing, make your first benchmark 1 week’s worth of expenses, then stretch it 2 weeks, then 1 month, then 3 months, and finally 6.  Start small and grow it from there.  But just start!

Once you have 6 months of expenses saved up then I recommend taking it a few steps further.

In the US, the government has the authority to declare a “bank holiday” and close all banks if economic woes dictate.  They did this during the Great Depression in the 30’s and came dangerously close to it again at the beginning of the recent so-called Great Recession when banks were failing at an alarming rate.

If they choose to exercise this authority, it will effectively close you out of any money you have in the bank.  It would only be temporary (hopefully) but during that time, it wouldn’t matter if you had millions of dollars in the bank, you would effectively be broke!

For this reason, I also suggest that you keep at least 1 month’s of expenses in cash, in a safe place.  Keep relatively small bills, i.e. 5’s, 10’s, and 20’s.  This would keep you solvent and allow you to purchase food and supplies during the temporary bank closures.

The final step in financial emergency preparedness is to have at least some precious metals: gold, silver, and platinum available as a hedge against inflation.  Again, I suggest at least 1 month’s of expenses in gold or silver coins.  Some people like to collect precious metals in the form of bars or bullion but I believe it is much easier to pay for a loaf of bread with a ¼ ounce gold coin than a large bar.

Once you have at least these minimums on hand and/or available, you might consider increasing each of these.  For example, maybe you want 1 year’s worth of expenses in the bank, 3 to 6 months of cash readily on hand, and the same for precious metals.  Be aware that there is an opportunity cost for money just sitting idle.  How much you decide to keep is a personal decison.  If you need help with this, consider hiring a coach or mentor to help you with this.

Following are the steps I recommend:

1)      Determine exactly what your expenses are for each month

2)      Begin saving a portion of your weekly or monthly pay (10% would be my suggestion) and placing it in an account separate from the rest of your money.  Ideally, this account will earn interest.

3)      Your first priority would be to save enough for 6 months of expenses in this account.

4)      Once you have 6 months of expenses saved in this account, continue putting money in the form of cash aside until you have at least 1 month of expenses in cash, in a safe place, outside of a bank that ONLY YOU know where it is.

5)      When the previous steps are completed, consider also purchasing small denomination gold and/or silver coins to hedge against inflation.  I recommend at least 1 month’s worth of expenses.

Just like having insurance you hope you never need, having an emergency fund will allow you to rest a bit more easily at night regardless of what the economy and Mother Nature has to offer.  And that is another key to creating a rich and satisfying life.

For more information or to learn about our coaching/mentoring services, contact me. 

Make yours a Great Day and a Great Life!


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Andrew Miner September 25, 2011 at 2:18 pm

Thanks for the reminder and advice on Hedging ourselves against potential disaster. Great points to consider implementing… soon!


Jennifer Battaglino September 25, 2011 at 9:20 am

Excellent advice and I like how realistic you are. Not everyone has the means to have 6 months of expenses saved up so start wherever you are, even if that means saving up for a week and building on that.
You’ve gotta start somewhere.

Jennifer Battaglino
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Eva Palmer September 25, 2011 at 8:49 am

This is a very good advice dennis that I have not done yet. I think it is time to implement it and be prepared for the future.
Thanks again!

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John Moulder September 25, 2011 at 8:25 am

Good advice . Bit scary when we have to go to those extremes . What a world we live in .

Clare Delaney September 25, 2011 at 3:04 am

Emergency plans are an excellent idea, and I like how specific you were in the article, even though your audience is broad and you don’t know the specifics of each of us.

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Single Dads Dating Advice September 25, 2011 at 1:51 am

Hi Wealth Doctor,

Building up a financial reserve for emergencies is an excellent rich habit.

Happy Dating and Relationships,

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Neil Dhawan September 25, 2011 at 12:55 am

Excellent article and phenomenal advice. Thank you for sharing your wisdom. Like you said ( in completing my thought recently ) … this is one of those things that is easy to do and easy NOT to do! With the growing concern for the economy, this is a timely, well thought out and well written article!

Stay Extraordinary and Do Great Things, Neil

Michael D Walker September 25, 2011 at 12:21 am

Excellent advice for everyone to heed. Also glad to see you recommend ING as I have been using them for years and have been very happy with their services.

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Dennis Perry September 25, 2011 at 4:55 am

Another advantage for ING is, as far as I know, they pay the highest interest rate on their savings accounts for a no-fee, no-minimum type of account.

Cherie Miranda September 24, 2011 at 11:56 pm

This is such a good thing to do. I’ve heard it suggested for years and have finally implemented a plan. I do like the idea of having precious metals as well. Thanks again, Dennis!

Cherie Miranda

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Rob Malone September 24, 2011 at 11:34 pm

I am in 100% agreement. My wife and I paid off all our debt in 2008 when things started getting funky. We keep cash and precious metals on hand (most junk silver coins for purchasing power if the dollar would collapse and a little gold too).

I am much more conservative on reserves though. In my business we keep a minnimum of 2 years over in cash reserves to be able to weather severe storms.

Gereat advice and the wise will head it.

Dennis Perry September 25, 2011 at 4:57 am

Well done Rob. I will be doing a post soon on debt elimination. Congrats.
Also, I love that you have 2 years of reserves. This is a great target for all of us but since most people have no reserves, even a small start is better than none.

Thank you for reading and commenting.


Annie Born September 24, 2011 at 9:57 pm

Wow! I thought you were only covering one area –
There seemed to be so many things to take into consideration –
Will unpack it and look forward to tomorrow!

Body Language September 24, 2011 at 7:30 pm

Thanks for the article, I wish I would have studied more on the great depression, in the sense that I never knew that the government had the authority to shut down all banks, for whatever period of time they wished.

Thanks for the article and your time.

Mark Hogan

Dennis Perry September 25, 2011 at 4:58 am

They still do and came very close to declaring a bank holiday in 2008-09.

The Knowledge Stylist: Music, Photography, Travel, Gadgets and More! September 24, 2011 at 7:02 pm

Very good article. I had not every thought of a bank holiday being declared and not being able to access the money. Having 1 month of smaller bills readily available is a great idea.


Kevin Bettencourt September 24, 2011 at 6:43 pm

This is excellent advice. Too many people live it up when they have it and then are left struggling when times aren’t so good. Emergency funds, precious metals, and cash are a great safety net.

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Body language secrets September 24, 2011 at 5:43 pm

Having the right assets in place of emeergency does not just consist of money but also some food and extra essentials of life.
Scott Sylvan Bell
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Now go implement!

Dennis Perry September 25, 2011 at 4:59 am

This is absolutely correct. Thank you.

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