In an ideal world, life would be fairly predictable. We would all have a steady, guaranteed income and no blindsiding emergencies.
Unfortunately, life entails some measure of chaos. The last few years have been more unpredictable than ever, from a global pandemic that has lasted over two years to its ripple effects of unemployment, shifts in demand, and long-term illnesses.
Even if you’ve been fortunate enough to weather the pandemic with minimal financial disruption, accidents happen, cars break, and job markets change. Experts traditionally have recommended saving three to six months’ worth of income to cushion the impact of these unplanned occurrences.
That is admittedly an ambitious goal, especially if you are already experiencing financial difficulty (you’re not alone – according to a 2018 Federal Reserve report, roughly half of Americans said they’d struggle to afford a $400 emergency). If 3-6 months’ income is too daunting right now, instead aim to first save $500, and then build slowly on it. Adding a savings category to your budget is the best way to start this fund (click HERE for tips on efficient budgeting).
Once you have that $500+ in a savings account, consider a money market account or CD to help grow the nest egg. THIS site provides a calculator to help you determine how much you should try to save based on your current situation, as well as suggested accounts in which to put your savings. Even if you have to build this safety net slowly, every little bit helps.
Emergency Fund Calculator: How Much Will Protect You? – NerdWallet
How Much Money Should You Have Saved in Your Emergency Fund? (cnbc.com)