Everyone should have an emergency fund. An emergency fund is somewhat self-explanatory. An emergency fund is money set aside to help you in case any type of emergency arises. A hospital visit, a car wreck, or any sort of disaster that you had no control over is what an emergency fund is used for. An emergency fund should serve as peace of mind for your future self. Just in case anything were to happen to you, you have some money set aside to help with costs. Now, how do you go about starting your emergency fund? This is based on what your current financial situation is like.
How To Start
To start saving for your emergency fund you just have to start. Consider your emergency fund as a bill. You should be putting money into your emergency fund every month no matter the amount. If you are a student right out of college, it is tempting to use your money to either buy things or pay off more of your student debt. Instead of buying that new TV you always wanted, put some of that money aside as an emergency fund. Your contribution can be as little as ten dollars a month, and that is ok. Put any amount of money aside in your emergency fund, and that is more than half the battle.
How much you want to have in your emergency fund is entirely up to you, but there are a few thing to consider when determining this amount. If you are single and freshly out of college your emergency fund may be less than someone who is in their forties and has a family with two children. Students with debt, aim for at least one thousand dollars in your emergency fund to start. As your career grows and you begin to earn more money and take on more responsibilities, look to double that amount or even triple it. You ultimately decide how much of a cushion you want in between you and these unpredictable emergencies.
Where To Keep It?
It can be tempting to dip into your emergency fund. This is when where you keep your emergency fund is key. The money put into your emergency fund should be easily accessible, but not too accessible. Consider keeping it in a different bank than your general checking and savings account. Be sure to have some sort of access to the money in the account. You can use either a debit card or have check-writing privileges.