WHAT IS AN EMERGENCY FUND?

The definition of an emergency fund is money you set aside for unexpected financial expenses that come your way. Such as, a job loss, a car breaking down, a medical event or something else that may happen. The money is there so you don’t have to borrow from family or friends, use a credit card or take out a loan.

HOW MUCH TO SAVE IN YOUR EMERGENCY FUND?

Most experts will tell you that you need to have 3-6 months of expenses in an emergency fund. While that may be true, if you are just starting one, you may want to start small. Save $500-$1,500 first. That may help you feel you’ve accomplished something. Then work your way up to saving for several months of expenses. Your goal is going to depend on your income and your debt/expenses. If you have debt, get out of debt first, then start saving for your emergency fund.

WHERE DO I KEEP MY EMERGENCY FUND?

Once you’ve decided how much money you want to save for, now it’s time to decide where to keep it. There is not a one size fits all, but you will want to be able to access it quickly, when needed. So that will take investing the money out of the equation. A high yield savings account (connected to your checking account) or a money market account at a bank or online could work in your favor. Do your research to find the best fit for your situation and with the highest yield.

Remember, an emergency fund is for needs, not wants. If it’s something that can wait a month, then it’s not an emergency. Be sure to also replenish the fund if you do use it for an emergency, that way if you have to use it again in the future, you can. An emergency fund is one of the best ways to help you take care of your future self should the need arise.