FiscalFusion

Maybe your car broke down, your computer was stolen, or you had a surprise visit to urgent care. Emergencies are inevitable, but you can prepare to deal with them by building an emergency fund. “There are so many things that happen in our lives that we don’t expect and most of them require financial means to overcome,” said Miklos Ringbauer, a certified public accountant. The industry standard is to save three to six months of expenses in an emergency fund, though this can feel daunting if you live paycheck to paycheck or have debt.

For those in such situations, it’s even more crucial to build a financial safety net. “Emergency funds allow you to prevent further debt,” said Jaime Eckels, certified financial planner for Plante Moran Financial Advisors. Rachel Lawrence, head of advice and planning for Monarch Money, recommends making minimum payments on existing debt while building your emergency fund and resuming aggressive debt repayment once a comfortable fund is established. Experts recommend starting with small milestones, such as saving $1,000 first, then progressing to one, three, and six months of expenses.

Eckels suggests building the fund in a separate, ideally high-yield, account. The appropriate amount depends on your financial responsibilities: single professionals may aim for $2,000–$3,000, while those with children or pets might target six months’ expenses. Self-employed individuals might maintain two funds: one for low-income months and one for true emergencies. Automating savings by withdrawing from your paycheck can help build a habit, and using a separate bank account can reduce temptation to spend the funds.

Making progress visual through trackers or apps can motivate continued saving. Lawrence also recommends saving windfalls, such as tax refunds or bonuses, splitting them between personal use and the emergency fund. Importantly, using the fund when an emergency arises should not cause guilt, as it fulfills the purpose of creating a financial safety net..