Emergency savings

Everybody knows that they need to save money and the first thing that you should be saving for is an emergency fund. This is money that you will be able to use if an emergency occurs and you find yourself in need of money. The amount that you need to save will vary but you do have to have some sort of an emergency fund.

The reason that you need to have an emergency fund is so that you have money available should an emergency occur. They can and do happen so you have to make sure that you have money available. It could be that you lose your job or that you get hurt and can't work, there are a lot of things that may result in your losing your income and needing money right away. Keep in mind that an emergency fund is for real emergencies, it is not to be used to make purchases of things that you want but don't have the money for.

The obvious question that most people have is how much should they have in their emergency fund? This is going to depend in large part on your circumstances and there is no general agreement amongst the experts. However the advice generally given is that you should have enough money to pay your living expenses for three months. This should be enough time to tide you over until you can get your finances sorted out. Obviously there will be variations in this as necessary so you will have to look at your own situation and decide what is best for you.

Actually building an emergency fund is pretty much like any other form of savings. The best way to do it is to build the fund up slowly by putting away a little bit at a time. The amount does not have to be large but you do have to make a conscious effort to save. If you are relying on having money left over at the end of the month that you can put into your emergency you fund you will likely wind up with little savings. There is no budget that you can't outspend.

One thing to keep in mind about an emergency savings fund is that it has to be kept someplace that is both safe and easily accessible. It is not generally a good idea to put it in places like the stock market because of the risk that you could lose it. There are few things worse than seeing your stock go down significantly one day and then finding that you need the money the next day. In general the best place to keep your emergency fund is in a savings account. While you will not earn large returns on the money it will be safe and easy to get at if you need it.