How Much Should I Have In Emergency Savings?
Most financial experts recommend that you have enough money to cover six to nine months of expenses.
How Do I Calculate How Much I Need for Emergency Savings?
When calculating how much you need factor in:
- Housing costs: Rent or mortgage, property taxes, insurance, as well as utilities.
- Food: Estimate your food expenses in your emergency savings fund.
- Insurance: Factor in your monthly cost for insurance, medical and dental. If you’re laid off, you may be eligible to stay on your former employer’s health plan for a period of time through COBRA – the Consolidated Omnibus Budget Reconciliation Act.
- Automobile: Any car payments you may have, gas, auto insurance, basic maintenance.
- Debts: You’ll still need to make payment on any debts you owe. Credit cards and other debts you may owe.
- Personal expenses: Don’t forget about these. Haircuts, clothes, toiletries, etc.
Where Should I Store My Emergency Savings Money?
An account that you can easily withdraw money from without penalty and earns a small amount of interest is a good place to store emergency savings.
Regular savings account or money market accounts are ideal for storing your emergency savings.
- Regular savings accounts: Allow you to access your money whenever you want. A regular savings account is a good choice for beginners.
- Money market savings account: Are a good option if you want higher interest rates but may require a higher minimum balance to avoid fees.