Emergency Fund: How Much is Enough?

Webster’s dictionary says that an emergency fund is “an unforeseen combination of circumstances or the resulting state that calls for immediate action.”  That “call for action” is the second part of this topic, FUND.

Here are four common emergencies that come to mind:

This one is all too familiar to Americans in this economy. When you lose your job, what do you do?  Most take out unemployment benefits. Unfortunately, the government’s unemployment check will barely cover the food bill. To make up the difference, an emergency fund would help ease the strain of unemployment while you search for a new job.

You lose your income. 

Unexpected car repairs. 

How many times have you hard of people complaining about unexpected auto repairs?  Things like transmission failures, blown head gaskets, and serious engine damage.  

Having lived with my parents for 22 years, I’m all too familiar with home repairs.  Septic tanks, water heater, plumbing leaks, upgrading windows, and air handler units come to mind.  

Home repairs. 

Medical problems. 

We all know how expensive health insurance is.  And even then, almost all insurance plans don’t cover 100% of major procedures and medicine prescriptions.  

A 6 month emergency fund should include all typical expenses for a six month period of time.  These things include but are not limited to: groceries, rent, gas, insurance, etc…

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