How Big is Your Emergency Fund?
How big is your emergency fund?
Experts recommend an emergency fund that covers at least 3 months of basic living expenses. Bankrate.com says this number can vary in certain situations. If you’re self-employed, a larger emergency fund can help when income fluctuates throughout the year. If your job’s unstable or you’re employed in a high-risk industry, you should save more to prepare for any disruption in your income. If you’re retired, an emergency fund is very important so you don’t have to tap into your retirement accounts. If you or someone in your family has health issues, an emergency fund will cover what insurance won’t. Do you have dependents? A larger account takes the stress off caring for them when emergencies arise. Do you drive an older car or live in an older home? Know that maintenance is necessary and repairs are inevitable. Finally, a larger emergency fund can help you sleep at night if there’s an economic crisis or another pandemic.
Now, you can get by with a smaller fund if your overhead is far less than your income. The same is true if you don’t have dependents looking to you for help. Now if you have high-interest credit card debt, build a smaller emergency fund while prioritizing paying off those cards. Automate deposits and don’t tap into the account unless there’s a true emergency. I’ll never forget the woman who told me she was thrilled to write a check to replace her hot water heater. Years before she would have panicked. As the Bible says, “Go to the ant…and become wise!” (Proverbs 6:6)
Now if you’ve been blessed with My MoneyLife, I invite you to discover the Crown Stewardship Podcasts. They focus on helping you find freedom in your finances and career. You can subscribe on Spotify and iTunes, or listen at crown.org.