Everyone hears about Emergency Savings and how you should have some, but that’s typically where it stops. What exactly is an Emergency Savings fund? How much should you have in it? How do you save money to build up this account? Hopefully this post will point you in the right direction.
Boy Scouts really know what’s up. Their longtime motto is “Be Prepared.” Smart guys. That’s the bottom line for your Emergency Savings. You need to be prepared for the worst, but always keep hoping for the best. For example, an Emergency Fund might be needed if you or another member of the family lost their job. That alone is stressful, but just think if you didn’t have the funds to cover expenses in the meantime. Be Prepared.
Let’s first talk about what makes up your Emergency Savings. We like to suggest at least 3 months of living expenses. Think of everything that your money goes towards in the course of the month – and don’t forget about the small things. (Heck, those seem to add up the most!)
Here’s an example of living expenses:
Okay, that’s great! Now multiple the total by three:
Now that you have your living expenses figured out, pop over to this financial calculator on our website to place in the numbers by clicking here.
To be extremely accurate and, dare I say, BE PREPARED, the calculator asks for you some nitty gritty things that we often don’t think about. These include your medical deductibles, insurance deductibles, etc. Adding these numbers into the calculator will give you the most accurate estimate for your Emergency Savings goal.
Now that you’ve inputted those numbers, click ok. The total will be reflected in the “Emergency Expenses” area. If you already have money saved, that’s awesome! Just put that number into the “Amount currently saved” box. Does that account have a rate of return? If so, place that percentage in the next box.
How much a month can you set aside to work towards that Emergency Savings goal? Whatever that number is, put it into the “Amount to save per month” box. Feel free to add the federal and state taxes in, if you so please.
Now it’s time for the calculator to work its magic and tell you how long it will take you to build up your Emergency Savings fund!
Tell us in the comment below, do you have an emergency savings account? Have you ever had a time where you needed to dip into your emergency savings fund?