I've put together a no-holds-barred guide to your emergency savings: What you need, when you might need it, and what your alternatives look like.
Should you have an emergency fund? Short answer: if you think you could need a financial cushion in the future , yes—but there isn't a catch-all amount you can put away every month and feel 100 percent secure about. I've put together your no-bullsh*tHow much should I have in emergency savings?
I’d say the most common response is some version of X months’ worth of expenses. Your expenses are what you typically spend in a month, which are less than what you typically earn in a month. Some feel comfortable with one month’s worth, three months, six months, or a year.Here’s what I consider an emergency: job loss. Your fund would protect you from being homeless, going hungry, sitting in the dark, or ignoring a health matter.
Here’s what I don’t consider an emergency: A vacation . An unanticipated medical situation An unexpected home or car repair. Even if you hadn’t planned on them, such expenses could be considered inevitable—just like rain will eventually fall, so have a rainy day fund.Budget by designating savings buckets; some banks will let you divide your savings account into subaccounts. So have a “Hiking in Banff” fund. A home repair fund for when the roof springs a leak or the boiler needs replacing.
What does this mean for you? Figure out how you’d manage with no income for however long you think you’d be out of work , determine your comfort level in various scenarios depending how big your fund is, and plan accordingly. For more stories like this, including celebrity news, beauty and fashion advice, savvy political commentary, and fascinating features, sign up for the
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