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Building & Maintaining an Emergency Fund


a woman sitting in her living room working on her emergency fund contributions

An emergency fund is your safety net during unexpected financial setbacks. Establishing and maintaining one can prevent debt and financial stress and it's not difficult to get started.


Here are 5 key ideas that may help guide you through creating and sustaining an emergency fund:


1. calculate the ideal emergency fund size. Aim for three to six months’ worth of living expenses. This buffer can cover unexpected medical bills, job loss or home repairs, ensuring you stay afloat even during challenging times.


2. Start small and be consistent. The reality of attempting to save up a large sum might feel overwhelming, and it is! Begin with smaller contributions (many people contribute $25 a month, then as their situations improve, they move to $25 a week, and so on). Consistency matters more than the initial amount.


3. Automate those monthly transfers to your emergency fund. This will help you build it steadily. Your current bank most likely has this technology available to you. And most of the banking apps available for free for your phone can automate this process.


4. Keep funds available. While Investments offer growth potential, emergency funds should be reasonably liquid and easily accessible - opt for a high-yield savings account or a money market account to avoid tying up these funds in long-term Investments. But don't make them too easy to remove!


5. Replenish your emergency fund promptly. If you must dip into it for any reason and make replenishing it a priority once your situation stabilizes. Focus on restoring the fund to its recommended level. This prepares you for any future expenses.


There you have it: Five simple tips for getting an emergency fund up and running. It can be the smartest choice you can make to reduce financial stress.


If you can implement this fairly simple process into your personal financial planning, you will soon discover it can be a real game-changer for you.


Good luck!

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