Let's face it, life is not all smooth sailing. We run into roadblocks, and roadblocks run into us. Whether it is a medical emergency, car repair, or even worse a job loss. Life happens to the best of us.
This is why you need an emergency fund. An emergency fund is truly a life saver. It's simply used for emergencies. By having this saving tool, It keeps you from having to go further in debt to take care of that unexpected expense.
So, how much should you save in this account? Typically, you should have at least three to six months of expenses in your account. Some financial experts say nine month to a year. This is totally up to your discretion and what you feel is safe for you and your family.
Your emergency fund should be easily accessible, meaning in a liquidated account that is easy for you to access if you should need to do so. I highly suggest you keep your emergency fund in a separate account from your primary checking account. We don't want it to be too convenient to reach.
Again, an emergency fund is used for emergencies only. Unforeseen circumstances. For example your transmission goes out in your car, or your roof starts to leak. Those are repairs that you didn't see coming, but that need to be taking care of as soon as possible. Having your emergency fund in place saves you from borrowing money. You will thank yourself later.
You shouldn't be dipping into your emergency fund for vacations, Christmas gifts, or getting your hair done. You should have created sinking funds for those expenses. Also, take note that once you take the funds out of your account for your emergency, you want to make sure you work to put the funds back into the account.