1 Why Is It So Important?
Life is unpredictable. Layoffs, illnesses, car or home repairs can happen at any time. Without an emergency fund, these situations force you to use credit cards or high-interest loans.
An emergency fund gives you peace of mind and freedom to make better decisions without money pressure.
2 How Much Do You Need to Save?
The standard recommendation is to have between 3 and 6 months of essential expenses. But the ideal amount depends on your situation.
3 months: If you have stable employment, few responsibilities, and another potential income source.
6 months: Recommended for most people. Good balance between security and saving effort.
12 months: If you're a freelancer, have variable income, or are the sole breadwinner.
3 How to Build Your Fund
- 1 Calculate your essential monthly expenses
- 2 Define your goal (3, 6, or 12 months)
- 3 Open a separate savings account
- 4 Automate transfers on payday
- 5 Start with 10% of your income
4 Where to Keep Your Fund
Your emergency fund should be in a safe place, accessible but not so easy that you use it for normal expenses. A savings account separate from your main account is ideal.
Don't invest it in stocks or volatile instruments. Liquidity and security are more important than returns for this specific money.