Emergency Funds

Most people never consider having an emergency fund because they are young, healthy and not thinking that something bad can happen–sometimes it does. Having short-term and long-term disability might seem extreme if you are 22 years old, but it can save you from serious financial problems. Moreover, having an emergency fund of money that is liquid is essential.

Things happen in life. Did you expect the car to break down? Did you think you would need a new refrigerator? Did you think you would get fired or laid off? Hurt? These things happen everyday and sooner or later it will be your turn. You need to have at least 6 months, preferably 9-12 months, of money saved that would cover all your expenses. This is not extreme and it makes financial sense in the long run. Obviously, credit card bills with large APRs would come first, but you need to build up a stash of funds to pay for life’s little problems.

Written by Nagel on October 27th, 2006 with no comments.
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