7 Ways You're Misusing Your Emergency Funds ...

1. Downplaying How Much You Need

Even if you know the value of having emergency funds, you may downplay how much you actually need. Financial experts recommend everyone has savings of at least 3 to 6 months of their income. Evaluate your savings account to determine how long you could survive after a job loss. Next, develop a plan to increase your savings account.

2. Shortchanging Yourself

Opening a regular savings account is an excellent start. But if you rely solely on this account, you're actually shortchanging yourself. Most savings accounts don't earn a lot of interest. To maximize your return, you'll need to look into other savings options. These include a certificate of deposit, a money market account or an online high-yield savings account.

3. Using This Fund for All Savings Goals

An emergency savings account should only be for emergencies. If you're saving up for other goals, such as retirement, college or a down payment for a house, you need to set up another dedicated account. Keeping all your money in one savings account may seem convenient, but it might be easier to track savings goals if funds are kept separate.

4. Using Funds for Non-emergencies

It's tempting to dip into your emergency fund whenever you see something you want. Maybe there's a sale at the mall, or maybe you're itching to take a vacation. Ultimately, it's your money and you can do what you want. Just know that the more you go into your emergency fund, the less cash you'll have available when a real emergency occurs.

5. Not considering Other Alternatives

Yes, an emergency fund is for emergencies. But before you make a withdrawal from this account to cover an unexpected cost, consider other alternatives. For example, you might be able to cover an expense by requesting a payment extension; and for larger expenses, you might sell a few unwanted items to drum up cash, thus reducing how much you need to withdraw from your emergency fund.

6. Making Irregular Deposits

For your emergency fund to grow, you need to get serious about making deposits. Each paycheck, deposit a certain percentage into this account – whether it's 5% or 10%. And if you're constantly forgetting to feed your account, speak with your bank and discuss automatic savings options. On a certain day each month, you can schedule automatic transfers from your checking account to your savings account.

7. Not Maintaining a Minimum Balance

Depending on the type of savings account, the bank may require that you maintain a certain amount in the account each month. And if your account balance drops below this minimum, the bank may charge a monthly maintenance fee. Fees can slowly eat away at your balance and reduce earnings. Therefore, know the terms of your account and aim to keep balances above the minimum.

If you don't have an emergency fund, now is the time to get one. Start slow and deposit what you can, and gradually increase contributions as your income allows. What do you feel is a safe amount to have in an emergency fund?