![]() If you’re starting from scratch, aim for a smaller goal-such as saving $500-and then work your way up to a larger goal. Start by setting a specific goal for how much you want to save. How To Build an Emergency Fundīuilding an emergency fund can take time, but it’s an important step in securing your financial future. While CDs typically offer higher interest rates than savings accounts, they’re not as accessible-you’ll generally pay a penalty fee if you dip into your money before a CD matures. It’s unwise to keep your emergency fund in a certificate of deposit (CD). However, you might need a larger opening deposit to get started. These accounts typically offer higher interest rates than savings accounts, and they often include check-writing privileges or ATM access. Another option is a money market account. These accounts typically offer higher interest rates than traditional savings accounts, and they are FDIC-insured, which means your money is protected up to $250,000. One of the most popular options for storing an emergency fund is a high-yield savings account. Once you have determined how much you need to save, it’s important to put your emergency fund in a safe and accessible place. For example, if you’re planning to purchase a home, launch a business or start a family in the near future, you may want to save more aggressively to build up your emergency fund. Other factors to consider include your level of debt, any dependents you have, and your overall financial goals. However, if you have a more volatile income or are self-employed, you may want to aim for six months’ worth or more. If you have a stable job with a regular income, you may be able to get by with three months’ worth of living expenses. As a rule of thumb, financial experts recommend having enough savings to cover three to six months’ worth of living expenses. ![]() ![]() ![]() The amount of money you should have in your emergency fund can vary depending on your personal and financial goals. How Much Should I Have in an Emergency Fund? An emergency fund is a crucial component of a healthy financial plan. Emergencies can include a sudden job loss, medical expenses, home repairs, car repairs and more.īy having an emergency fund, you can avoid going into debt or dipping into other savings, such as a 401(k) or kid’s college fund. But if your life obligations still leave you feeling vulnerable, up your emergency fund to an amount that feels right for you.Īn emergency fund is a financial safety net you can rely on when unexpected expenses or life events occur. How much of a safety net do you need to feel financially secure? If it’s a standard three- to six-month emergency fund, that’s great. Consider Your Comfort Levelįinally, consider your comfort level. Additionally, if you have dependents, a mortgage or other financial obligations, you may need to save more to cover your expenses. However, if your income is unpredictable or you work in a volatile industry, you may need to save more. If you have a stable job and income, you may be able to get by with a smaller emergency fund. Multiply this total by the number of months you would like to have covered by your emergency fund.įor example, if your monthly expenses are $3,000 and you want to save for three months, your emergency fund goal would be $9,000. ![]() This includes rent or mortgage payments, utilities, groceries, transportation, insurance premiums and any other recurring bills. Calculate Your Monthly Expensesĭetermine the right amount for your emergency fund by calculating your monthly expenses. Calculating your emergency fund can be broken down into a few simple steps. ![]()
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