It's Time For An Emergency Fund

An emergency fund is an absolute necessity in good times and in bad. It gives you money to fall back on if you become ill or disabled and can't work or if you or your spouse lose a job, incur large medical bills, or have major, unplanned expenses such as a car or home repair.

It is recommended that you have three to six months worth of basic livings expenses in an emergency fund. But some people need substantially more. It all depends on what type of emergency is most likely to happen and if you have some type of economic safety net, such as disability and unemployment coverage and/or life, health and property insurance. If you don't have any safety nets, your need for an emergency fund is much greater and more urgent.

To build your emergency fund, start by figuring out where your money is going. Once that is figured out and you see where you can cut, the next step is to open either a money market or savings account. It's very important to be disciplined and put the money away consistently for "true" emergencies. Once you have three months of living expenses, consider moving the money to a three-month Certificate. All the while, continue to make deposits to the emergency fund savings or money market account.