Creating an emergency fund
An emergency fund may ensure that large or unplanned expenses won’t derail your financial security.
Why have an emergency fund?
Life is unpredictable, but your financial well-being shouldn’t be. An emergency fund may help prepare you for life’s surprises, such as job loss, injury, car trouble or unexpected home repairs.
When something unplanned happens, an emergency fund may help you cover the expenses and stay out of debt.
How much to save
As a rule of thumb, try to save enough to cover 3 to 12 months of basic household expenses. The amount you need depends on your personal responsibilities, such as whether you’re supporting a family or can rely on another source of income.
How to save
Try these ideas to help you get started:
- Make a small contribution each month.
- Open a separate account. Keeping the money away from your everyday funds will help you avoid spending impulsively.
- Establish an automatic weekly or monthly transfer from your checking account to your savings account.
- Start your account with extra money, such as a raise, bonus or tax refund.
Emergency fund tips
- If you’re concerned about having enough money to fund both your retirement plan and your emergency fund, create a budget to help you save for both goals. Use the budget worksheet.
- Find ways to reduce expenses to make it easier to build your emergency fund. Consider cutting back on just a few meals or coffees out each month and redirecting the money toward your emergency fund, instead.