The Kitchen Table

How to Start an Emergency Fund

By: Megan Oberst

 

Now more than ever, emergency funds are a crucial aspect of financing during uncertain times. Read on to discover how to start an emergency fund or to reassess your current account.

What it is: An emergency fund is an account that consists of money set-aside to use for unexpected expenses.

Why it is important: Emergencies or unforeseen expenses can occur at any time. These instances include but are not limited to: medical emergencies, home repair, car maintenance, unexpected travel expenses or unemployment. An emergency fund helps provide a safety net of money for you to use during these circumstances so that you can avoid a large credit card bill or creating debt.

Now, let’s review three easy steps to help start your emergency fund.

First, calculate your monthly expenses. List all expenses such as rent, utilities, groceries, internet, streaming services and other social costs you make every month. This is also a perfect time to reevaluate your spending to see where you can trim down on some purchases.

Second, determine your emergency fund goal. Six months of funds can be a safe amount to set aside in case of emergencies, specifically, unemployment. Naturally, no one’s situation is the same, so determine these savings based on your own needs.

Third, get to saving! The best time to save is always now. After determining your emergency fund goal, calculate how much money you are able to put aside each month in order to comfortably reach this goal.

Having a buffer of money on reserve can be a source of financial relief when you need it most. Don’t wait until an emergency arises to start an emergency fund, being financially prepared can help you handle surprise expenses.

*Employees of LPI Loans and our affiliates are not attorneys and LPI Loans DOES NOT provide any legal advice and users of this web site should consult with their own attorney for legal advice.