An emergency fund is essential for dealing with sudden expenses in your life, such as a broken refrigerator, a medical necessity, or a job loss.
But what happens if you’ve had to drain the money you had previously saved?
Experts recommend that an emergency fund should be able to cover 3 to 6 months of living expenses, but when times are tight, even a few hundred dollars can make a difference!
Finding the money to set aside can come in a variety of ways.
Start by looking at your monthly living expenses and your income. If you are making more than you are spending, you should consider directing some of that surplus to emergency savings.
An income tax refund or a bonus from your job are also great revenue sources for your emergency fund.
If your budget is tight, you might want to look for ways to reduce spending in order to build savings, such as cutting entertainment costs, trimming your heating and cooling costs, or even consider getting a part-time job.
Once you have identified income that can be saved, you can streamline the process, either by setting up a direct deposit or a regularly scheduled transfer from your checking account to your emergency account.
While it can be hard to build an emergency account, you’ll be glad you took the time to fund a financial cushion that can help get you through tough times.