Until about a year and a half ago, I had no such thing as an emergency fund. While I was responsible and I had a savings account, I never felt that bad about dipping into it if my bills were higher than normal or after the holidays. After my husband became unemployed, I understood just how important it was to have at least 6 months worth of living expenses saved up. And I started saving. It took a little more than a year, but we saved up 6 months of expenses! Oh yeah, and that was on one income.
According to USAA, about 22% of people have NOTHING saved in an emergency fund! If you're one of them, don't fear! It's not too late! You have to start small - put away what you can, and try to set up automatic deposits from your paycheck. It's easier to not spend money you think you don't have. Next, make sure you have easy access to it. I wouldn't recommend putting it in a long-term CD. Your emergency fund has to be somewhat liquid so you can get it quickly when you need it. Last, look around for the best rates - check out Bankrate or Mint. You want to make sure your money is getting the most interest it can.
Another important thing to remember about your emergency fund is that it is not a fixed amount for everyone at any point in time. Since my husband and I just bought a house, we have to adjust how much we have saved and contribute a little more to cover the mortgage payments. Did you recently have a child? What about buy a new car? Anything that you would consider essential to living your life needs to be counted for in your emergency fund - don't short yourself. Evaluate every time you add a significant expense to your life.
What about you? Do you have an emergency fund set up? How long would it be good for?
*A couple weeks
*1 month - 3 months
*3 months - 6 months
*More than 6 months
*What's an emergency fund?
Leave your answer in the comments below!