Emergencies happen when we least anticipate them. It could be an unexpected job loss, a sudden medical condition, or a car breakdown. Such situations can be stressful, especially if you’re not financially prepared. Fortunately, you can cushion yourself from unexpected expenses by having an emergency fund.
An emergency fund is a pot of money you set aside to help you deal with unplanned financial needs. It can be a lifesaver, helping you stay afloat and avoid going into debt. Here’s what you need to know about an emergency fund.
The first step in creating an emergency fund is knowing how much you need. Financial experts recommend having three to six months’ worth of living expenses in your account. However, your individual circumstances may require more or less. To calculate your emergency fund needs, consider the following:
