3 Things to Know About Emergency Funds

There are 3 important things you should know about emergency funds:

1. How much to save. The rule of thumb is to save at least enough to cover three to six months of living expenses. If you think it may take longer than six months to land a new job and you are the sole breadwinner, consider saving more than six months’ worth of expenses.

2. Where to save. An easily accessible, low-risk, interest-bearing account, such as a savings or money market account, is a good choice for an emergency fund.

3. When to tap it. Use the savings in your emergency fund only for real emergencies, such as a job loss, major medical bills, or some other unexpected event. If you withdraw money for non-emergencies, you run the risk that your financial safety net may not be in place when a true emergency occurs.

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Article originally published in Eye on Money, January 2018.