Creating an emergency fund often gets pushed aside in our normal day-to-day lives because it’s not relevant unless it’s well…an emergency.
But that’s the thing about emergencies, they’re almost never expected. Many of us found out the hard way this year that we really weren’t prepared for a financial crisis. It was a tough reminder that having an emergency fund can provide peace of mind in times of great fear and uncertainty.
You may be familiar with advice that you should have three to six months' worth of living expenses in your emergency fund. This amount also depends on your particular circumstances like job security, health, income, and debts owed.
A good way to accumulate emergency funds is to create an automatic payment that sets aside funds every pay period. When you reach your goal, don't stop adding money--the more you save, the better off you'll be.
Review your emergency fund either annually or when your financial situation changes (if you get a raise, maybe start contributing more). Major milestones like a new baby or homeownership will likely require some adjustments as well.