Simple Alternative to the Extended Warranty

I usually advise people not to buy extended warranties on most items. They are a big money waster. Then the other day I read Flexo’s How to Create Your Own Extended Warranty on Consumerism Commentary and he pointed out a great way to afford repairs without getting suckered into an extended warranty.

I recommend that you read the article for his perspective on this topic which comes from his experience working at an electronics store. But here’s my cut-to-the-chase version of how to create a Warranty Fund. My version is slightly different since Flexo suggests that you create a separate or sub-account for each product. I would simplify this and create one warranty (or repair) fund that could be used whenever you need it for any item that breaks down.

Step 1. When you purchase an item, make note of the cost of the extended warranty. Don’t buy it.

Step 2. Transfer this amount to a special savings account that you will not touch until one of your “protected” items needs to be repaired. Coors Credit Union offers a “You Name It” Savings Account, which is perfect for the Extended Warranty Fund. This will build up a sizable Warranty Fund.

Step 3. When one of your self-insured products breaks or otherwise needs repairs, dip into your Warranty Fund.

Establishing a Warranty fund will help you avoid tapping your primary Emergency Fund unless the Warranty Fund doesn’t cover the full expense and the product must be fixed or replaced.



  1. Flexo
    Posted October 21, 2009 at 8:59 pm | Permalink | Reply

    I geuss I wasn’t completely clear. One account (sub-account) for ALL items… thus it is truly a pooled account. I’ll revise the post so that’s clear.

  2. Celeste Murphy
    Posted October 21, 2009 at 9:02 pm | Permalink | Reply

    Your post is still a good one. Thanks for your insight.

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