<p>I’m going to talk with my parents as well, but I wanted to get all of your perspective.</p>
<p>I get my first “real” paycheck tomorrow (woohoo!!!) and I’ve been doing some budgeting. I want to set up an emergency fund for unexpected expenses (separate from a savings account), but I’m not sure how to do that. Do I set up a separate checking account that I don’t use except for emergencies? Or is it a completely different type of account?</p>
<p>Don’t use a checking account. It is money you want to keep so use a separate savings account. Get it linked to your checking so you can transfer when needed. If you have the option, use a credit union rather than a commercial bank.</p>
<p>One of mine got crazy with easy transfers.<br>
Did you get a permanent job? If so, congrats.
The important thing in your formula is to stick to it. See if the employer can direct deposit to more than your primary account. If you expect overall expenses to be lower (eg, with housing provided, not driving to work,) you may need only spending money and any loan repayments in the main account. Get this $ diversion started and you can fine tune later.</p>
<p>We have our emergency savings at our bank…but we do not have it linked to our checking. We have to go to the bank to withdraw money from that savings.</p>
<p>Well, IMO, the answer depends on your self discipline. With a separate account that you have a mental minimum balance, you won’t transfer to a lower balance. You could do the same with your primary savings, make sure you maintain a minimum to match your emergency fund. Another option is to set up a separate checking with its own debit card that you only use for ‘emergency fund’ withdrawals. But the interest on Checking is typically lower than on savings.</p>
<p>My daughter has a seperate savings account with a credit union that has a program with every transaction money is taken out by rounding up and placed in a seperate account. She doesnt have to do anything, its automatic.
I believe she can control the denomination that is rounded up to.</p>
<p>Don’t make it difficult, keep it simple. Have a checking acct and a savings acct. For each paycheck, do direct deposit to checking and saving. There is no special designation as an “emergency fund” as far as bank is concerned. You get to decide how you want to use your money, bank is not going to care. I advised my kid to keep 6 months of living expenses in savings (cash), anything extra would go into long term investment. She funds her 401K first.</p>
<p>Lookingforward, I did! I’m a Residence Hall Coordinator for Colorado Mesa University. 3 weeks in and loving it! RAs arrive this weekend and I’m super excited to have people in the building besides me.</p>
<p>Thank you all for the advice! Thumper, I like your idea…I may look into that.</p>
<p>I will have much lower expenses: housing is paid for, and insurance and everything comes directly out of my check before I even see it. All I have are pretty much car payment, student loans starting in November (I’m in grace right now), credit card payments (minimal), phone bill. So I could do something like that as well.</p>
<p>I’ve set up an account with Mvelopes and will try that for a few months to budget and see how I like it. If that doesn’t work out mom has offered to set me up with Quicken, which I’ve used before but didn’t particularly like.</p>
<p>oldfort, the 401k is also automatically deducted from my check before i see it. I contribute I think 8.5%, employer contributes 11.5%.</p>
<p>Mom suggested an account with ally so that it’s separate. I’m going to be doing lots of research on minimum amounts, fees, etc.</p>
<p>The main thing is that you do regular savings to Emergency fund and don’t raid it for fun money. Since you hae free housing, you may be able to ramp up that account faster than new grads - that’s great! </p>
<p>DS did research and thought best deal for him was an Ally credit card. He’s still a student, so at this point he only qualified for Ally debit card. </p>
<p>Colorado_mom, that’s what I’m hoping as well I’m going to delve a little deeper into Mvelopes this weekend and see what tools they offer, because I’ve barely skimmed the surface. </p>
<p>It seems like it’ll be pretty easy to set it up, especially if I can do an auto-deposit. I tend to do better if I never see the money to begin with.</p>
<p>-“I currently do my banking (regular checking) with a credit union. Should I set up a separate savings account through them?”</p>
<p>Ask your credit union if they have more than one type of saving account. Mine does. We keep our emergency funds in the Preferred Savings and money that is earmarked for our property taxes and other things we need money for on a regular basis in the Mint savings account. </p>
<p>I have a different take on the emergency fund. Our family savings are in our businesses, DH’s 401K, and our longterm stock account (where I invest in exchange traded funds that cover the whole market). None are particularly liquid, but our credit rating is excellent and we have the ability to borrow from our credit cards and stock margin up to close to a year’s expenses. I think the emergency fund becomes dead money–it’s not working for you and making more money–if you’re good at planning, because in fact most “emergencies” are predictable. For example, I’ve heard people say that they had “an emergency replacement of their car tires.” No, that’s not an emergency, that’s a predictable expense. Yes, you can have an accident or an appendicitis attack—but that’s what health insurance is for, and the deductible is predictable. </p>
<p>You describe minimal expenses, so my take would be: try to pay three payments ahead on your car (so you could skip three payments if you had to), create a reserve for repairs (tires, etc.), and then start investing your money in a moderately liquid way–I’d aim for 15% of your take-home pay. My preference is for a stock market account because the tax structure in this country is tilted toward making stock investments profitable (lower taxes on capital gains, for example). A 401K is good, but what do you want to buy in five/ten years (rather than at 59.5 years old)? Another car? A house? A graduate degree? </p>
<p>Good advice dmd! A PhD is a “maybe” at this point, so that is definitely something to be thinking about (but several years down the road…faculty from my MS program won’t even write recommendations until 5 years after we graduate from the program.)</p>
<p>All lots of great food for thought! Thanks everyone :)</p>
<p>We also needed some set aside in “not under our noses” accounts. It’s a super idea to let your money work for you- and many, many people now secure did that, starting early. But right now, you’re just coming out of the gate. You don’t have enough back up funds squirreled away to take much risk. If 2008 happens again, you may not want to wait out the market to see losses restored. So you get to a point where you have enough set aside that you take a portion to invest. Also, the 401k counts. Maximizing the employer contribution is good. When you can, take a look at those reports, follow them.</p>
<p>If you want a PhD program and may need financial aid, there are other step to take to maximize that, which you can also look at when you have the funds accumulated. You’re a good kid, best wishes.</p>
<p>Thanks so much lookingforward! What a nice thing to say :)</p>
<p>The nice thing about working in Higher Ed is that if/when I do decide to go for a doctorate, my employer will probably pay at least part of it. Most schools offer tuition remission for their employees. So I’ll have that going for me.</p>
<p>The 401k was handled for me; they automatically do the 8/11.5% split. It wasn’t even an option, which I actually like. I just had to choose where I wanted the money going.</p>
<p>“Don’t make it difficult, keep it simple. Have a checking acct and a savings acct. For each paycheck, do direct deposit to checking and saving. There is no special designation as an “emergency fund” as far as bank is concerned. You get to decide how you want to use your money, bank is not going to care. I advised my kid to keep 6 months of living expenses in savings (cash), anything extra would go into long term investment. She funds her 401K first.”</p>
<p>This is the best advice. It doesn’t matter whether you call it your emergency fund or your long-term fund or whatever, as long as you have the discipline that you just don’t touch it (unless, of course, it IS an extreme emergency). And for a young person, the power of compounding and the power of funding a 401K cannot be beat … Esp if said young person has parents who could help out if there were a real medical or similar crisis. </p>
<p>I’d rather my kids fund their 401K’s and then build an emergency fund, because honestly if there were a true emergency I’d be helping out anyway. Let the 401K (or other investment vehicle) build over time. </p>
<p>Ditto on not needing to call it an emergency fund. Putting money aside in any savings account will help you ignore it. But- it will be immediately available. This not money to invest in anything, you have it not to make more money but to be a buffer for unexpected expenses. Once you have had time to build it up to the level you consider your safety margin you can remove some of it to invest or spend on a splurge item/vacation/whatever.</p>
3 weeks in and loving it! RAs arrive this weekend and I’m super excited to have people in the building besides me.</p>