Being prepared for a financial crisis or hiccup can take time. Building up your emergency fund isn’t something you can do overnight, but working at it day by day or month by month is an easy way to become prepared without seeing a huge decrease in your funds. But how much is enough? We’re here to let you know! 

How much should I save for an emergency fund? 

How much you can save will depend on where you are at in life. You will have debts, monthly expenses, insurance, kids and so on that will affect how much cash you can afford to set aside. If you are just starting, aim to have three months’ worth of expenses saved up. This can help if you were to lose a job – then you’d have enough money to afford your living expenses until you find a new employer. After you save up three months’ worth of expenses, the next step is to get to six months.  

How do I save for an emergency fund? 

Start by calculating your monthly expenses such as your debts, groceries, gas, insurance, payments related to your children’s activities and so on. See if there are any places you can cut. Then begin to build a budget so you can start slowly saving each week or month. If you eat out once a week instead of five times a week, then that savings could go into your emergency fund. 

Where should I save my emergency fund money? 

You’ll want your money to be easily accessible because when you need it, it will most likely be an emergency so you won’t have any warning. If you are able to, place this money into an interest-earning bank account such as a savings account. You wouldn’t want to have all your money in a CD or IRA because you will incur early-withdrawal penalties. 

When should I use my emergency fund? 

New shoes or a tv on clearance is not the thing you drop your money on. You use an emergency fund for emergencies only. This could be a new car part if your car broke down, having your HVAC serviced or funds to keep you going after job loss as mentioned above.  

We hope these answers help you find a starting point to begin building or add onto your emergency fund. Being unprepared can make a bad situation worse, so be sure to open a savings account to store your emergency fund money today!