When it comes to unforeseen emergencies, the best defense is a fund established specifically for unplanned events. An emergency fund can help you stay financially afloat in times of stress. Whether it’s a job loss, natural disaster, or unexpected expenses, an emergency fund will save you from accruing too much debt. Watch the video below to see how to start an emergency fund.
How to Start an Emergency Fund
How Much Should I Save?
Aim to save six to nine months’ worth of critical living expenses, such as:
- Bills (mortgage, rent, etc.)
- Child Care
- Minimum Payments (on credit or loans)
Where Should I Save It?
Once you’ve decided how much you need to save, set your funds aside in a separate account other than regular savings. Using different accounts helps to avoid dipping into your emergency fund for non-emergency spending. Save your contributions in an account that is not easily accessible and earns interest.
There are a number of scenarios that could leave you needing your emergency fund. From job loss to car repairs to medical expenses or a natural disaster, you never know when there will be an emergency. Be prepared! And remember to only use your emergency fund when it’s absolutely necessary. Here are some other tips for what to do during a financial emergency.