Start With an Emergency Fund
Sometimes also known as a “rainy day” fund, an emergency fund is generally a stash of money held in a liquid savings account that is specifically set aside for unexpected events that carry some financial impact like losing your job, unexpected medical bills, or necessary, but unanticipated home or car repairs. It is the most basic piece of your financial safety net. The only objectives for this money should be that it is easily accessible in times of emergency and should help you and your family avoid high-interest credit card debt when unexpected or emergency expenses arise, which is why the money should be money that you have agreed not to touch under normal circumstances.
Though the importance of an emergency fund is generally acknowledged among financial experts, there is no one universal rule for how much should be saved in such a fund. Many financial advisors suggest having enough savings in an easily accessible account to cover your living expenses for three to six months in the event of illness, job loss, or other serious emergencies. The amount you choose to plan for should be dependent on your unique circumstances like the stability of your job, whether your spouse works, and what your fixed living expenses look like.
Either way, some emergency savings is better than none, so go ahead and add “save to emergency fund” to your financial goals and build the monthly savings into your budget.