Emergencies happen! And if you haven’t saved enough money in your emergency fund, then you likely won’t be prepared. That means that in order to be prepared for any financial emergencies or setbacks, you’ll need to work your emergency fund savings into your monthly household budget.
The key to creating an emergency budget is to first create a working budget that both allows you to live happily and that also affords a substantial amount of your income to be sent to savings. Of course, this is the hardest part about any budget – finding “extra” money to save. However, the focus of this post is to offer a little guidance about how to save for emergencies.
Many experts recommend having between 3 and 6 months income in your emergency savings fund. However, this depends on your situation. If you are single and have very low expenses, then you may need only a month of income. If you have a big expense budget and your family relies on you for their living, you may want to increase the emergency fund to over a year’s income. Of course, once you surpass a few months earnings, you’ll probably want to invest that money in an investment account anyway, so your emergency assets then become part of your individual or family savings accounts.
When surfing the web on this topic, we found some helpful advice about how to calculate how much money you need to budget for emergencies:
How much money do I set aside?
Ideally, you should set aside as much money as possible each time you get paid. The more money you can save, the better your chances of handling an emergency situation. Some experts suggest that you should save up between three and six months worth of living expenses.
Of course, each individual will have his or her own limits in regards to spending and saving, so a figure or percentage that may work for other people will not necessarily work for you. Instead of relying on another person’s figures, you should review your budget and figure out how much you might need and what you can afford to save.
For example, you will need to determine how much certain emergencies will cost. What is your insurance deductible for home, auto and medical insurance? How much might you need to repair your vehicle if certain common problems occur? If you lost your job, how long can you reasonably expect it to take to find a new job? How much do you spend every month, and how much of that money is essential to survival?
By answering these questions, you can arrive at a rough ballpark estimate of how much money you need to have available in your savings account. The more money in savings, the better, but don’t feel discouraged if you can’t put aside that much money right away. Some savings is better than no savings….
Read more of this post at How much money should I put away for emergencies?
This article goes on to show some rough calculations for determining the money you’ll need to set aside. We like their philosophy as we feel the same way about budgeting for emergencies.
For your emergency fund, even if you can’t save it all right away, make sure you get started as soon as possible so that when the need arises – and it will – you will be financially prepared.
