Emergency Fund

We recommend that most people have three to six months’ worth of savings available in case of an emergency. This is for necessary expenses. You should use this money if you or your family has a financial need such as:

  1. Transportation problems (car)
  2. Emergency home repairs
  3. Loss of a job
  4. Medical emergencies
  5. Reduced pay from business
  6. Or some other unplanned event

Some financial issues that could occur from having a medical emergency include:

  1. can’t work – reduced work time
  2. medical costs – deductible costs
  3. pay for help with groceries/errands
  4. changes to home or car
  5. on-going treatments – medicines

Why is an emergency fund helpful?

This savings allows you the ability to avoid the following:

  1. avoid having high interest (credit card) debt
  2. reduce stress
  3. cover unexpected expenses
  4. ability to get the problem fixed
  5. can help yourself and your family

Where should you keep your emergency fund?
You want to keep your emergency fund in a very stable and liquid place. This can include the following:

  1. bank / credit union savings account
  2. short term bond funds
  3. money market – in investment account
  4. no penalty CDs
  5. treasury funds

Having a reserve can also keep you from bouncing check and help you avoid bank fees.

How much should you have in your emergency fund

4 factors to determine how much of an emergency fund you should have

  1. how stable and secure is your income
  2. what are your monthly necessary expenses
  3. are other depending on your income
  4. what insurance do you have and how high are your deductibles

If you’re in emergency mode, you’ll reduce your monthly expenses.

 

Spend less than you earn and invest the rest.

Bill & Ivan

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