How Much Should You Have in Your Emergency Fund

If you are like most people, you probably don’t think about the future as much as you should. You may be comfortable in your current situation and don’t want to think of anything bad happening in the future. Well, this is not the best thing to do when it comes to finances. With personal finances, you need to think about what you are doing now and what you will do in the future. Money should always be thought about and worked on. This is why it is important that you think about either contributing to your emergency fund again or start one up, if you haven’t.

An emergency fund is money that you can use if you lose your job or come into a financial hardship. It will save you from going into a lot of debt and it could even save you from bankruptcy! While bankruptcy may sound extreme, it can happen if you don’t think ahead.

So, how much should you have in your emergency fund? It used to be that all you needed was enough to be out of work for three months. However, because the economy has taken such a nosedive, people are out of work for a lot longer and now it’s best to try to save enough to get you through a year!

To figure out how much you should save, just look at your salary. This is how much you should try to save. It may take you a couple of years or more to save that much, but once you do reach that amount, you are set and you can leave it alone.

Remember, you want your emergency fund accessible. So don’t tie it up in an investment or Certificate of Deposit (CD). Put it in a money market account so you can make interest on it, more than what you would in a regular savings.

(Photo Credit: http://www.flickr.com/photos/tonythemisfit/2571197075/)

July 29th, 2009 by Marcelina Hardy | Posted in Saving Money | (0)