Emergency Fund Essentials
DID YOU KNOW?
A 2017 GOBankingRates survey found that more than 1/2 of adults have less than $1,000 in savings
Here are some basics about emergency savings from experts at GOBankingRates, America's Money Smart Family, and the Bureau of Labor Statistics:
What constitutes an emergency?
- Experts recommend that you plan savings for the following emergencies:
- Medical emergency
- Home Repair Emergencies
- Emergency Travel (e.g. family funeral)
- Job loss
- Car Repair/Replacement
How much should one ideally have in emergency savings?
- Financial experts recommend having enough in your savings to cover six months worth of expenses
- According to the Bureau of Labor Statistics, annual household spending in the U.S. is $57,311. Based on that amount, the average emergency fund should be $28,656.
- A recent article from America's Money Smart Family calculated that an an emergency fund should be anywhere from $20,000 to $50,000 for a family of four
Where should one keep his/her emergency money?
- A money market account
- There will ideally be a large amount of money and you need your money to be relatively easy to access
- You'll get a higher interest rate than a simple savings account, and the high balance required will discourage you from taking the money out for non-emergencies.
- For health emergencies, you would be able to use money that you save tax-free in a Health Savings Account (HSA), which is offered by many employers.
- If you do use an HSA to save for health emergencies, be sure that the account allows money to roll over from year to year.
- To learn more about savings, please visit our Saving 101 page.