Question How do you pay for unexpected emergencies?
Answer Borrow the money from your PYF savings account, then pay it back.
Complete Answer Unless you are an extremely lucky person, you will have unexpected financial emergencies in your lifetime. Use the money from your PYF savings account to pay for the financial emergency, then pay yourself back. The nice things about borrowing money from yourself (being your own bank) are you will always be approved, no paper work to complete, it is an interest-free loan and you get to decide the terms (amount and frequency of payments) of the loan.
Borrowing money from your PYF Savings Account. You should borrow money from your PYF Savings Account if the emergency expense is more than can be paid for from your monthly Spending Plan. For example: I could pay a $250.00 repair expense for the washing machine from my monthly Spending Plan’s Housing Expense. On the other hand, when my furnace had to be replaced at a cost of $3,600.00, it was more than I could afford in one month, so I borrowed the money for the new furnace from my PYF Savings Account. I amortized the $3,600.00 expense over three years. I paid back my PYF Savings Account $100.00 a month for the next three years.
Helpful Hint Through no fault of your own, you could be the victim of identity theft and or bank fraud – unexpected financial emergencies. Because of the threats of identity theft and bank fraud, use two completely different banks (not affiliated with one another) for your checking account and your PYF Savings Account. If an account is compromised, you will still have access to some money from the second bank until the problem is resolved.
Financial Literacy Knowledge/Skill
- Paying for unexpected financial emergencies.
- Amortizing a loan to yourself.
- Using two separate banks to help protect yourself from identify theft/bank fraud.
Comments or Questions
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Next week’s topic: How do you leverage your buying power to pay for big-ticket goods or services?