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Here's how to keep surprise expenses from hurting your budget.
- Saving money for the "surprise" expenses that keep cropping up can help you cover an unexpected car or home repair, a vet bill. That same fund can also cover wedding presents or a night out.
- Ramit Sethi, author of "I Will Teach You To Be Rich," suggests building this fund by saving $50 each month, and then adjusting that amount according to how much money you find yourself needing.
- Even if you don't know exactly how that money will be spent in the future, you do know that something will come up - because something always comes up.
- See Business Insider's picks for the best high-yield savings accounts »
You keep an emergency fund for emergencies, and a checking account for everyday spending. But, life happens - suddenly, your car needs the wiper blades replaced, you need to cover a small home repair, or your pet needs a trip to the vet. Or, you get the opportunity to attend a friend's wedding or baby shower, and need to buy the perfect gift.
It's always something.
While there's a time and a place to dip into your emergency fund, there are plenty of other small things that don't warrant it. You might find that your car needs its oil changed, or that you need to buy a wedding gift - things where using an emergency fund isn't appropriate. Keeping a savings account for non-emergency surprises, or any events or spending outside of your regular budget, can help you cover these costs easily.
Ramit Sethi, author of "I Will Teach You To Be Rich," says that saving for these types of expenses should be a part of your strategy. To start, he suggests setting up multiple savings accounts. Choose high-yield savings accounts that earn interest each month. A savings account that allows you to earmark funds for different purposes, like Ally's bucket feature, can be helpful. Then, make it a goal to save $50 each month in these accounts.
Eventually, you'll probably realize you need to save more than $50 a month. "You'll soon realize that this cartoonishly low figure is not enough," he writes. "But with some time, you'll have a better idea of what the figure should actually be and can change the amount accordingly."
Here are a few instances where these types of savings could be particularly useful.
1. A surprise car-related expense
When you own a car, there's a lot that needs to be maintained. While you might need to dip into your emergency fund to cover big costs that keep you off the road, small expenses can pop up, too. Things like windshield wipers or an oil change can take you by surprise, and it could be helpful to have a few dollars set aside to keep these things from cutting into your budget.
2. A large medical or dental bill
Even with insurance, medical or dental expenses can set you back. A relatively small expense like purchasing contacts or glasses can be less painful with a savings account that you've designated for that purpose. While an emergency fund should be used to cover major medical or dental emergencies, small expenses like co-pays can be easily covered by your surprise savings fund.
3. A wedding, engagement, or baby shower gift for friend or family
After a flood of engagement posts on your news feeds over the holiday season, you might find yourself spending big money on wedding presents in the spring and summer. Surprise invitations to baby showers, and bachelor or bachelorette parties are also big expenses. Save for them today to enjoy them fully tomorrow.
4. A meaningful charitable contribution
A meaningful reason to donate can pop up anytime. With a surprise savings fund, you'd have the freedom to give, without worrying about whether or not you're giving more than you can afford.
5. An increase in your insurance payments
Insurance prices are constantly changing. From your car insurance and home insurance policies can increase or change from year-to-year, or, you might find that it's time to get life insurance. When your insurance bills increase, it can throw your budget a curveball, but saving can help prevent that.
6. A home repair
Any homeowner knows just how many surprises can happen in a short time, and how costly those expenses can be. Keep a savings account to cover these expenses so that sink repair or new refrigerator doesn't cut into your monthly spending. With a surprise savings account to cover these smaller, not-quite-emergencyl expenses, you can save the emergency fund for bigger or more essential spending.
7. A can't-miss night out
Life happens fast, and when you get that text, you know you can't miss it. When you're enjoying a night out (or a last-minute weekend away, or a once-in-a-lifetime concert) you don't want to be stressing about where you'll find the cash to cover it. With these savings, you can spend the night making memories instead of worrying about your budget.
8. A sudden flight to a funeral
When you don't live near friends and family, getting back home last-minute can be a huge expense. Set aside a few dollars now to make a flight feel less painful in a moment when you need to be there.
9. A vet bill
Pets aren't cheap, and a visit to the vet even for a non-emergency problem could easily cost $100. Pet insurance doesn't always cover everything your cat or dog may need, so building your own savings account to cover their care is a smart way to keep them well.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
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