Build An Emergency Fund

Build An Emergency Fund

An emergency fund is exactly what it says…for emergencies. You never know what life brings you so being able to have funds that will help you through an emergency can lessen the financial stress. If you’ve ever been laid off, had an unexpected death in the family, a medical emergency, or other, one of the first things you probably think about is how to afford the financial obligations. It’s good to build an emergency fund.

How Much

How much do you need to save in an emergency fund? There’s no exact number but I’ve seen figures of 3 or 6 months of your salary. If you make $4000 a month, then have an emergency fund of $12,000 or $24,000. I like to have at least 6 months worth personally. Imagine if you got laid off. It would take a good few months or more to find another job.

Where To Save

Let’s say you’re creating your emergency fund. Where do you put it? You need to put it somewhere it is readily accessible, somewhere you can access it quickly. My first thought is to put it in a high yield savings account. Even though you’re not going to get a great return, the value won’t go down and you can access it quickly. If you put it in a CD, you may get a higher interest rate but you’re locked in a term period. If you put it in the stock market, there’s the chance your investment can go negative.

Adjust and Replenish

If your cost of living goes up, don’t forget to adjust your emergency fund amount. Occasionally, assess what your 3 or 6 months of living costs are. Also, if you had to use your emergency fund, don’t forget to replenish your emergency fund.

Emergencies happen from time to time. I’ve experienced being laid off as well as having to deal with emergency medical costs and cost of dealing with funeral costs. Having an emergency fund helped out and I know how valuable it is to have one. It helped reduce the financial burden and the stress. If you are interested in following my journey, email subscribe to get alerts of latest posts or follow me on FacebookInstagram, and Pinterest.

To see all my previous articles, go to my Archive page.

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