Emergency Funds

Emergency Funds are one of several categories you can save for:

• Emergency fund 

• Big purchases - saving up for a large expense like a new phone, car, or house

• Retirement - putting money aside for when you retire

• Investing - saving money to invest it

What is an Emergency Fund?

Money you put away should lose your job or ability to work full-time because you are fired or from a serious illness or injury.

This should cover at least three to six months of your everyday living expenses:

• Rent

• Insurance

• Food

• Car Payment

Why are Emergency Funds important?

Two-thirds of Americans would struggle to come up with $1,000 in an emergency, according to the Associated Press. This issue transcends the wealth gap as the aforementioned statistic includes many families who make more than $100,000.

How do you calculate the amount you need?

You can calculate the amount you need to save in this fund by adding up all of your monthly living expenses and then multiplying by 3-6.

How Do You Start Saving?

Start by paying yourself first.

As soon as you get your paycheck immediately put some of it aside for this fund (you can set this up automatically).

Setting aside a certain amount of money for savings each month is more important than buying things you may want now.

Saving 10% of your paycheck for this fund is generally a good guideline.

Where can this money come from?

Small recurring expenses can add up so by cutting a few of them out you can save a significant amount over time. These small expenses can come from monthly subscriptions, eating out all the time, or even getting Starbucks everyday.

Do you really need 5 streaming services? Using the images below you can see how fast they become larger expenses.

It can seem overwhelming but a little today results in a lot tomorrow.

You do not need to make this money magically appear. Instead by putting a little bit away overtime you will have something to fall back on in case there is an emergency - you never know when one is going to strike.

This concept applies to all categories of saving.