Creating an Emergency Fund

Having an emergency fund is a core part of being financially healthy, so that you can help protect yourself from inevitable financial ups and downs.
An emergency fund means you will be more prepared for a sudden expense and that you can handle small financial hits more smoothly. Unemployment, illness, family emergencies and sudden, and significant expenses like home or auto repairs can come up with no warning.
People have different estimates about the best amount to save in an emergency fund, and the answer will depend on your income, expenses and spending habits. Generally, your emergency fund should have somewhere between 3 and 6 months of living expenses. That doesn’t mean 3 to 6 months of your income, but how much it would cost you to pay for essentials for that length of time, including rent, utilities, debts and food.
Some other questions you may want to ask yourself: Is my career path or industry particularly risky? Do I reliably make the same amount of money every month? Have I budgeted for my whole family? How could my family’s financial needs change down the road?
If you don’t think you can hit the recommended target of 3 to 6 months of savings, remember that something is better than nothing. Establish a monthly minimum and try to beat it each month, and soon you’ll have a nice cushion.

Post a Comment