Emergency Funds are 🔑

Author

JC Rodriguez
February 08, 2024

Good morning!
Currently my wife and I are building our emergency fund. When you got some CUSHION between you and life’s unexpected turns (car breaks down, job loss, etc) you can actually sleep better! Let’s dive into that today:

DEFINITION
Emergency Fund

  • Is an emergency fund the same thing as savings? Yes and no.

  • When you save for an emergency fund, you’re setting money aside that is designated to be used only for life’s emergencies. You don’t use it to buy groceries, to pay for expected car maintenance, or to get last-minute gifts. You use it for emergencies! (that can be defined as unexpected car repairs, hospital visits, job loss, and things of that matter).

PRACTICAL ADVICE
How much is enough for an Emergency Fund?

  • When you’re paying off debt, you don’t need to go crazy with an emergency fund. $1,000-$3,000 should be fine, and it’s small enough to still keep you on your toes while you’re paying off debt! I don’t want you getting into more debt when life’s emergencies happen.

  • Once you’re out of debt, that’s when you can beef up that emergency fund. But how much is beefy?

  • A fully funded emergency fund should cover 4-6 months of your expenses.

  • So if you look back at your bank statements and see that you on average spend $3,000 a month to live. Then you need to multiply $3,000 × 4 = $12,000. $12,000 in the bank, set aside for life’s emergencies. That’s a great place to be!

HELPFUL RESOURCES
Where we set aside our emergency fund

  • Ashlea and I opened up a high-yield savings account with CIT Bank. It’s a great place to earn 5% interest on your savings without doing anything!

  • We deposit $2,000 a month into that separate account so we can BEEF UP our emergency fund. We should have a fully-funded emergency fund in just a couple months!

  • Tomorrow we’ll talk about what a high-yield savings account is…

OUR COMMUNITY
What are your questions? Or share a win!

  • Reply to this email with any personal finance question you have, or share with me any wins in your life! (I’ll respond to your questions anonymously in future emails)