{{featured_button_text}}

Have you ever had one of those months? The water heater stops heating, the dishwasher stops washing and your family ends up on a first-name basis with the nurse at urgent care.

Bad things happen to the best of us, and instead of conveniently spacing themselves out, they almost always come in waves.

The important thing is to have a financial life preserver, in the form of an emergency cash fund, at the ready.

Although many people agree that an emergency fund is an important resource, they’re not sure how much to save or where to keep the money.

When starting an emergency fund, you’ll want to set a target amount. But how much is enough? Unfortunately, there is no one-size-fits-all answer.

For example, if you own your home or provide for children, you may be more likely to face financial emergencies. And if the crisis you face is a job loss or injury that affects your income, you may need to depend on your emergency fund for an extended period of time.

If saving several months of income seems an unreasonable goal, don’t despair.

Start with a more modest target, such as saving $1,000. Build your savings at regular intervals, a bit at a time. It may help to treat the transaction like a bill you pay each month.

Consider setting up an automatic monthly transfer to make self-discipline a matter of course. You may want to consider paying off any credit card debt before you begin saving.

Once you see your savings begin to build, you may be tempted to use the account for something other than an emergency.

Try to budget and prepare separately for bigger expenses you know are coming. Keep your emergency money separate from your checking account so that it’s harder to dip into.

An emergency fund should be easily accessible, which is why many people choose traditional bank savings accounts.

Savings accounts typically offer modest rates of return. Certificates of Deposit may provide slightly higher returns than savings accounts, but your money will be locked away until the CD matures, which could be several months to several years.

Some individuals turn to money market accounts for their emergency savings. Money market funds are considered low-risk securities, but they’re not backed by the federal government like CDs, so it is possible to lose money.

Depending on your particular goals and the amount you have saved, some combination of lower-risk investments may be your best choice.

Please consider the charges, risks, expenses and investment objectives carefully before investing.

The only thing you can know about unexpected expenses is that they’re coming – for everyone. But having an emergency fund may help alleviate the stress and worry associated with a financial crisis.

If your emergency savings are not where they should be, consider taking steps today to create a cushion for the future.

Be the first to know

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.

Tom and John Mills are registered investment advisers and certified financial planners. Reach them at 254-0155. MillsWealth.com. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Strategic Wealth Advisors Group (SWAG), a registered investment adviser.

0
0
0
0
0