EMERGENCY SAVINGS FUND

Emergencies are unpredictable and can affect your financial stability in an instant. While emergencies can’t always be avoided, an emergency savings fund can help you manage unexpected events by giving you peace of mind and preventing you from going into debt.

What is an Emergency Fund?

An emergency savings account, emergency relief fund, or emergency fund is defined as a special pot of savings that’s set aside to cover unforeseen and unexpected costs.

Like any savings category, it’s never too late to begin building up your emergency fund. The important thing is to start – even starting small is a step in the right direction.

Why You Need an Emergency Fund

Why might a person need an emergency fund? In what way is an emergency fund a form of insurance? What’s the difference between an emergency fund vs a savings account?

An emergency fund is specifically used to cover or offset the expense of an unexpected situation. It serves as a safety net, only to be used when financial crises occur – and it usually kept separate from your other savings account. An emergency fund can help pay for large, unexpected expenses. Here are a few emergency fund examples:

• Medical expenses
• Home repairs
• Car repairs
• Living expenses from unemployment

How Much Should I Save?

Your emergency fund amount varies, because how much you should have in an emergency fund depends on your lifestyle, monthly costs, income and family needs, a good emergency fund ratio is to set aside at least three to six months’ worth of expenses. While this may seem intimidating, the idea is to put a small amount away each week or two to build up to your goal. You can adjust the amount as needed based on your bills, job stability or other factors.