Okay, so not everybody out there has an emergency fund…it’s just reality. Sure most people would agree that keeping money set aside in case of emergency is a wise idea.
But not everybody has the money or interest needed to have a fully funded emergency fund.
How much do you need for a fully funded emergency fund? That depends on your finances, goals, values, comfort level and many other things.
The size of your emergency fund can only be decided by you. How prepared for emergencies do you want to be? How much money do you want to keep sitting around?
My emergency fund goals:
$500 1st goal (achieved)
$1,000 2nd goal (achieved)
$2,000 3rd goal (achieved)
$3,000 4th goal
$4,000 5th goal
$5,000 6th goal
Honestly, I’m not too interested in keeping any more than $5,000 in a savings account for our emergency fund. Granted I have an awesome savings account with very generous interest compared to most other banks.
But I know that I could anything over $5,000 to make us more money. I could put it in an investment account and earn much better returns.
Does that mean that you shouldn’t save more than $5,000 in your emergency fund? Of course not! Some people would much rather keep that money in a nice secure savings account than risk losing it in the stock market or other investments.
Also, for us, $5,000 is close to 2 months worth of income. If you’re income is substantially more, then it won’t stretch as far. The same goes for if your income is less, $5,000 could be numerous months of income for you.
If we lose our main source of income (such as getting laid off), then our emergency fund (at it’s max of 5k) will only provide us with 2 months worth of income. We could probably stretch it to as many as 3 or 4 months, but we’re already so close now that it would be very, very painful to do so.
My suggestion, if you don’t currently have an emergency fund is to start small. Realistically, could you save up $500 over the next 6 months for your starter emergency fund? If not, then how about $100?
Starting small is better than never starting at all. Plus, you’re going to be very happy you did the next time an emergency comes up.
Do you have an emergency fund? Why or why not?
What was your 1st emergency fund goal?
Image Credit: http://www.flickr.com/photos/76657755@N04/6881502016/