Having money in an emergency savings fund will help you get through a drop in income, pay for emergency repairs, and handle other unexpected expenses.
How much should you save?
A good rule of thumb is to set aside enough money to cover three to six months of living expenses. However, even $1,000 is a good start.
When calculating how much you need factor in:
- Housing costs
Rent or mortgage, property taxes, insurance, as well as utilities.
Estimate your food expenses in your emergency savings fund.
Factor in your monthly cost for insurance, medical and dental.
Any car payments you may have, gas, auto insurance, basic maintenance.
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 to store your emergency savings
Savings accounts offered by a bank or credit union are the safest place to keep your emergency fund. Emergency funds should be kept in fairly liquid account so you’ll be able to access them quickly if an unexpected expense comes up