Emergencies happen but not many people plan financially, but there are a couple of ways to save towards your emergency fund. If a major life event happens, having an emergency fund can bailout of financial hardships.
A key factor in building an emergency fund is knowing more is always better since you never know what a sudden emergency can impact your life. Financial experts indicate that an emergency fund should consist of three months of expenses set aside that also can depend on financial situations.
For example, during the recession when many lost their jobs, three months of expenses weren’t enough. Financial experts highly recommend setting a huge worth of expenses set aside now with some people requiring more than others, but these people who built a big emergency fund were able to maintain their finances better.
Some financial experts have two years of expenses set aside as a secure safety net for a financial emergency in a money market account (if they’re conservative). Saving towards an emergency fund can help with any financial situation this can be applied towards saving money for anything needed.
The best way to start an emergency fund is to be saving money automatically with the following process. Your money comes in shortly after your paycheck is deposited directly into your money account into a separate money market account or savings account.
It’s recommended to not have direct access to this savings or money market account so you can keep your savings protected and are less likely to spend from it. The emergency fund can help during hard times such as losing a job or having a health care issue.
The emergency fund should not be used for vacations or a night out as it is for emergencies that will help you out during a hardship.