Emergency Funds: Importance and How to Build One

Life is full of uncertainty and having an emergency fund can be a life saver. Despite the importance of emergency funds a lot of people still underestimate the benefits of having one. 
In today’s short article we will see why emergency funds are essential.

What is an emergency fund ?

An emergency fund serves as a safety net. It’s money set aside in a bank account specifically for unexpected expenses such as:

• Unforeseen medical emergencies
• Major car fixes
• Job loss
• Home repairs

Why do you definitely need one ?

Having an emergency fund is essential for financial stability. You never know what kind of unexpected expenses can come in your life. Knowing that you have an emergency fund creates financial security that you can rely on in a time of need and avoid the use of credit cards or high-interest loans to cover emergencies which can protect you against debts.

Here are other few reasons you should have an emergency fund: they give you more flexibility, reduce financial stress and anxiety.

How much should you save ?

The answer to this question varies from individual to another. The amount you can allocate to your emergency fund each week or month depends on your incomes, expenses, financial obligations.

In general, you should have three to six months worth of living expenses.

Conclusion

To sum up, an emergency fund is primordial if you want to be prepared for any financial challenges life throws your way.

Building an emergency doesn’t happen overnight, it takes time and dedication. Start small but start now.Even you can set aside only a small amount, do it, overtime your emergency fund will start building up.