How much do you need in an emergency fund?
Even a small amount of cash can help when unforeseen expenses arise
The COVID-19 pandemic taught Americans to expect the unexpected and changed the way we think about our finances. In fact, according to new research from Empower Retirement and Personal Capital, four in 10 people say they are spending less on non-essentials than they did before, and over half say having an emergency fund is a higher priority now.
But how much do you need in an emergency fund? Here’s how to figure it out:
1. Calculate your expenses
In order to understand how much money should be in your emergency savings, you should start by making a list of your recurring expenses and what you spend on them each month. Include expenses such as: rent, mortgage, childcare, student loans, groceries, utilities, car payment(s), medical bills, cable and internet. Add the amounts together to get your total monthly expenses.
2. Use an emergency savings calculator
Now that you have a good idea of your monthly expenses, use this calculator to determine how much is suggested for your emergency fund.
Conventional financial wisdom says your household should have enough cash stowed away to cover three to six months of expenses. But it’s a good idea to save even if that amount feels out of reach. Even a small emergency fund could keep you from sliding into debt if you get hit with an unforeseen expense. Here are five ways to build an emergency fund (without really trying).
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