5 Tips to Create an Emergency Fund (That is Actually Helpful When You Need It)
You’ve probably heard that you should have an emergency fund. Maybe you even have one already. But would it actually help in an emergency? Not just a minor emergency, but a serious one?
The answer, for many people, is no.
Depending on the size of your emergency fund and various other factors, you may find your emergency fund is pretty useless. Here are a few things to keep in mind when creating an emergency fund.
Forget the $1000 Rule
$1000 is good. It’s great if you had $0 six months ago. But this is intended to be a ‘starter emergency fund’. It’s the very least you might need in a minor emergency.
Be Cautious with the ‘3 – 6 Months of Expenses’ Rule
Saving 3 – 6 months of expenses is a better way to look at things, but even that will only help in some emergencies. If you lose your job, and it’s highly likely you’ll be back at work within six months, your fund will cover you. If you’re injured, ill, or suffering from major mental health issues, it may not.
Don’t Assume an Emergency Fund Can Replace Insurance
You can’t insure against everything, which is why you need an emergency fund. But you need insurance too. Assess the types of emergencies you’re vulnerable to and insure against them.
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