How Much Money Should I Put in an Emergency Fund? | St. Johns Bank
Having an emergency fund is something that you should make a high priority when getting your finances in order. An emergency fund can be used for unexpected expenses or to keep you afloat in case of a lapse in income, and building one up is a great way to take control of your money and build a good financial foundation.
If you are not sure where to start or what to do, you are not alone! About 30% of Americans reported that they would have trouble paying for an unexpected expense over $400—while that is not ideal, we are happy to help point you in the right direction so you can be ready for any emergencies life may throw your way.
Defining Your Emergency Fund Goal
To determine how much to target for your emergency fund, it is a good idea to start with your monthly expenses to determine what you need. Calculate your core monthly expenses—these are your expenses such as rent, car payments and insurance that would have to be paid regardless of your financial situation.
Extras such as eating out do not have to be calculated, as you would likely be omitting these expenses entirely in a financially tough spot. Whatever number you come up with, target having at least three times that as your goal for an emergency fund.
Where to Keep Your Emergency Fund
Ideally, you will be able to store your emergency fund separately from all your other money so it is only touched in cases of a true crisis.
Opening a separate savings account is a wise choice so your emergency fund will be a standalone entity and does not get factored into your total cash on hand.
How to Grow an Emergency Fund
If you are starting from scratch, developing an emergency fund can feel quite daunting! However, saving something is better than saving nothing at all, so it is completely OK to start with small steps toward reaching your goal.
Consider small ways that you can save throughout the month and you will likely be surprised at how much extra cash you end up with!
If you need help setting up a savings account for emergencies, that is what we are here for! Contact us today to learn more about our different options.