Emergency Fund Basics: How Much, How Long and How To
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For many people, an emergency fund seems like a distant luxury, something they know they should have, but that, ultimately, is too out of reach. If your money’s being pulled in a dozen directions, how are you supposed to save anything for the future?

Here’s the truth: You can still build an emergency fund. Even if you only add a few dollars at a time, you can achieve that goal. The most crucial step is committing yourself to it. Here are some tips to help you get started, calculate how much you’ll need, and motivate yourself to save for your future.

How to Get Started Building Your Emergency Fund

All it takes to get started is a dollar and a place to put it. Seriously, that’s it. You don’t need $1,000 upfront—start with what you can and commit to saving at least that much next time. Dedicate a savings account to your emergency fund and don’t touch it for anything else.

The next step is setting a goal. If there’s one way to guarantee you’ll “forget” to save when the next week or month comes around, it’s saving blindly, without a specific end goal.

You need a goal on the horizon, waiting like a finish line to motivate you to keep going.

What should your emergency fund goal be? It depends on two things: how long you might need it to last and how much it’ll need to cover in expenses.

How Long Does Your Emergency Fund Need to Last?

Your emergency fund goal depends on your circumstances. Experts recommend building a 6-month emergency fund to be fully prepared for job loss, home repairs, or other costly surprises.

If paying for six months of expenses seems way out of reach right now, start with a 3-month goal. Then, you can see how you feel when you reach that number. Chances are you’ll be motivated to keep saving. Now it’s time to get honest and answer the big question—how much should you save in your emergency fund?

How Much Should You Have in Your Emergency Fund? Everyone’s situation is unique, so you’ll have to crunch the numbers yourself to determine how much you’d need to get by for 3 or 6 months.

If your rent is $800, you spend $200 on groceries, your other bills are another $400, and you want $200 of padding per month, your monthly spending is about $1,600. Your 6-month emergency fund will need $9,600. There are a few other things to consider. Are you the only source of income for your family, or does someone else work, too? Are you factoring in potential expenses from everyone in your household?

Once you’ve taken an honest look at how much you spend and how much you could realistically cut back, you can set your emergency fund savings goal, and start slowly but consistently working toward it. Whatever goal you set, round up. In the long run, you’ll thank yourself for over-estimating how much you’ll need in your emergency fund. Do your best to turn saving into a habit (or, better yet, automate it), and you’ll reach your goal in no time.

Tips to Boost Your Emergency Fund Savings

An essential factor in reaching your savings goal is setting a monthly budget that allows you to save. By sticking to a budget, you have more control over your spending and more insight into how and where you can save.

You can also have a garage/porch/yard/online marketplace sale to kickstart your emergency fund savings and, as a bonus, clear out all of that junk and clutter you’ve been meaning to clean up for ages.

An emergency fund is well within your reach. It’s alright if it won’t be ready for a year or longer. Each time you contribute to it, you’re taking an important step to prepare yourself and your family for anything. That’s something you deserve to feel great about!

Here’s more news on Emergency funds for small business owners.

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