One common reason for an emergency fund is to cover the cost of an expensive car repair or accident. Even if your car is insured, you may still have to pay the deductible in the event of an accident, and common car repairs like new brakes, new spark plugs or a new timing belt could set you back hundreds of dollars.
Key Takeaways. Most experts recommend keeping three to six months' worth of expenses in an emergency fund, but some situations warrant more. Some experts recommend a smaller emergency fund while you're paying off debt. If your job is secure and you don't have a lot of expenses, you may be able to save less.
When deciding where to keep your emergency fund, consider these four different accounts that offer easy access and benefits:
What is a Financial Safety Net? ... A financial safety net is meant to protect you and your family, at least in part, from losing your financial security or derailing your long-term financial goals because of some unexpected event like a catastrophic illness or other personal tragedy.
Because an emergency fund is supposed to be easily accessible and liquid, the recommended vehicle for it is usually a savings account. Savings accounts don't even keep pace with inflation, meaning that an emergency fund is a money-losing proposition over the long term.
The rule of thumb
So, if you spend £1,000 a month on mortgage or rent, food, heating bills and other things you can't live without, you should aim for £3,000 in emergency savings. But, remember any amount saved will help you if you have to pay for something you weren't expecting.
How to Save $5,000 in 3 Months
Your emergency fund should be liquid, meaning you need to keep it in a place where you can get to it easily and quickly. The best option is a simple checking account or money market account that comes with a debit card or check-writing privileges.
By 40, you should have three times your salary saved. By 50, you should have six times your salary saved. By 60, you should have eight times your salary saved. By 67, you should have 10 times your salary saved.
If the interest earned in a checking account is less than the inflation rate, then our cash won't be able to buy as much as it used to, so an emergency fund saved in a checking account actually becomes less valuable over time.
Emergency Fund Examples
7 Things To Do After Saving An Emergency Fund
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