Emergency Fund

Building an emergency fund is an essential part of any good budget. This fund protects your long-term savings and prepares you for unexpected expenses, like an urgent repair or a temporary loss of income.

What are essential expenses?

To size your fund, first identify your essential expenses — the ones necessary for your survival and well-being.

• Housing: rent or mortgage and utilities such as electricity, water, and gas.
• Food: groceries and basic necessities.
• Transportation: what you need to get to work or school.
• Health: insurance and essential medications.

How much should you save?

The general guideline is to build up the equivalent of three to six months of essential expenses. If that feels like a lot, start with an initial goal of one month and grow from there.

How to build it

Include a fixed contribution to the fund in your monthly budget, and keep it in a separate, easily accessible account — but distinct from your everyday spending account, so you are not tempted to dip into it.

An emergency fund turns a crisis into a mere inconvenience.