An is money set aside for life's curveballs—car repairs, medical bills, job loss. It's your financial safety net.
"I lost my job unexpectedly and had bills due in two weeks. Without my emergency fund, I would have gone into credit card debt. Instead, I had three months to find a new job without panic."
Why You Need One
Without an emergency fund, surprises go on credit cards. Then you're paying 20%+ on that car repair for months. The emergency fund breaks that cycle.
How Much? Build in Stages
Pro Tip
Don't try to save 6 months overnight. Start with Stage 1 and work your way up.
Stage 1: $1,000 Starter Fund Covers most minor emergencies. Achievable quickly, builds momentum.
Stage 2: One Month of Expenses Your rent, food, utilities, insurance, transportation. Calculate it and save that number.
Stage 3: Full Fund (3-6 Months)
- 3 months: Stable job, low expenses
- 6 months: Self-employed, variable income, or dependents
Where to Keep It
Do This
Put it in a at an online . You'll earn 4-5% while keeping the money accessible.
Avoid This
Don't invest your emergency fund in . You don't want to sell at a loss during an emergency.
Start Small, Stay Consistent
| Per Paycheck | Annual Savings |
|---|---|
| $25 | $650 |
| $50 | $1,300 |
| $100 | $2,600 |
Quick Win
Set up automatic transfers right after payday. What you don't see, you don't spend.
What Counts as an Emergency?
| Emergency | Not an Emergency |
|---|---|
| Job loss | Vacation |
| Medical bills | New phone you want |
| Car breaks down | Black Friday sale |
| Furnace dies | Holiday gifts |
Watch Out
If you can predict it, it's not an emergency. Use separate savings for things like car registration and holidays.