What Is an Emergency Fund?
An emergency fund — or “rainy-day account” or “safe and sound money” or whatever you’d like to call it
is a chunk of money set aside particularly for the unexpected things life throws your way. It’s not to be used to buy a new car. It’s not to be used for a vacation to Rome. It’s for use only in case of emergency: a tree falls on your house, your youngest daughter breaks her arm, you lose your job.
Most personal finance experts agree: The first thing you should do after meeting basic needs is to establish an emergency fund. Life is full of surprises. You’ve probably heard of an emergency fund before, but maybe you’ve never started saving for one, and now with all of the developments with COVID-19, you may wisyou had.
Why Emergency Funds Are Important?
Emergency funds are designed for situations like COVID-19 because they can give you some peace of mind when faced with a reduced income and other instances that could hit you financially. Knowing that you have everything covered for a few months can hopefully help ease your mind in a time of distress and uncertainty.
Our experts recommend saving enough to cover roughly 3-6 months of expenses in the event of an unexpected situation like a job loss, Slowdown in business, car breakdown, and so forth.