Set up an emergency fund

Emergency savings often are overlooked, but emergencies can send your life into a financial tailspin. Even relatively small costs like a dropped cellphone or flat tire can throw off your budget. Having a cushion for such expenses gives peace of mind, even if emergencies never happen.

Emergency Savings Tips

• Make a goal to have at least three months’ worth of living expenses set aside. If this is unrealistic, start by setting aside a portion of each paycheck to build your emergency fund.
• Keep emergency savings in an interest-bearing checking or savings account. This allows easy withdrawals of the money, and it is safer than keeping it in cash. Do not keep it in an inaccessible investment account.
• Use the money only in a true emergency. Unexpected medical bills or losing your job constitute real emergencies; finding a great sale does not.

Make creating an emergency fund a top short-term priority. Use the Emergency Fund Worksheet Download Emergency Fund Worksheet to calculate how much you can start saving to build your own fund.

 

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