Emergency funds: How to save for the unexpected

I once read that nearly half of Americans don’t have $500 saved to cover an unexpected expense. Back then, I was part of that statistic and felt the stress that came along with being financially unprepared. Today, I’ve made it a mission to stress the importance of saving money for rainy days, emergencies, and unexpected job loss.

What is emergency savings?

An emergency savings is money to help you cover emergencies. The term emergency is quite financially vague, with people associating it with either having a flat tire or losing income. But all agree that an emergency doesn’t include new clothes, gifts, or a night out with friends.

I define emergency savings as money used specifically to cover periods of underemployment or unemployment. It’s an emergency when your income stops. Without a source of income, you may find yourself unable to pay for rent, food, and utilities. That is a state of personal emergency.

 

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