Part 7/8:
One of the most common mistakes is using the emergency fund for non-urgent needs. It's crucial to establish strict guidelines outlining what qualifies as an emergency, ensuring the fund remains intact for true crises.
- Underestimating Your Goal
While starting small is encouraged, stopping too soon may leave you vulnerable. Regularly review your financial situation and adjust your savings goals as needed to reflect changes in your circumstances or expenses.
- Keeping It in Cash Only
While having cash on hand feels safe, this approach isn’t optimal for long-term financial health. To mitigate inflation’s impact, consider placing your emergency fund in a low-risk, interest-bearing account, which allows your savings to grow while remaining accessible.