When emergencies happen, your financial stability is shaken up. Events like illness, accidents, losing a job, a home or a car repair can drain your family’s household income. Find out why your family should have an emergency fund for those emergency moments.
Emergency Fund 101
An emergency fund will help you handle an unexpected financial crisis. It can seem overwhelming to decide how much money to put in your emergency fund, but once you figure out how much you should stow away, you will be prepared financially to handle an emergency.
Why Do You Need An Emergency Fund
Anything can happen and that is precisely why you should consider having an emergency fund for you and your family. Emergencies are unpredictable — like nature. And speaking of nature, weather can play a large part in emergencies when it comes to car and house repairs. Investing in an emergency fund is crucial, because hurricane season can create serious damage to your property.
Weather isn’t the only cause of emergencies. If you lose your job, someone falls ill, or a car accident — just to name a few — you will need to be able to provide, so you don’t end up in unimaginable debt. Having an emergency savings account can take some of the financial burdens of dealing with unexpected events.
How is an Emergency Fund Different
An emergency fund is a separate savings account that is used only to cover or offset expenses of an emergency. The money in this account should not be counted as a part of a long-term savings plan for a car or college tuition. This fund is strictly a safety net and only to be used when a crisis occurs.
How Much Should You Put Your Emergency Fund
The amount for your Emergency Fund depends on your lifestyle, monthly expenses, income, and dependents. Calculating this may seem daunting at first, but putting a little bit away at a time will help you achieve your financial goal.
At a minimum, you should save about three months of expenses in your Emergency Fund. You should calculate for mortgage or rent, utilities, gas, food, job stability, and health (medications, doctor visits, etc.). This means if you need $4,000 a month to cover your basic needs then you should have $12,000 in your emergency fund. It is better if you have six months saved up especially if you have a family.
Create an Emergency Fund with DEXSTA
You can’t predict the future, but you can save for it. At DEXSTA, we want to help you achieve financial freedom by creating an emergency fund. To learn more about how you can open an account or learn more about emergency funds please contact us.