Emergency Fund: How Much is Enough?

How much is enough for an emergency fund, you ask? Well, that's a highly debated topic. The answer is (as always), it DEPENDS.

Webster's dictionary says that an emergency fund is “an unforeseen combination of circumstances or the resulting state that calls for immediate action.” What kind of emergencies are we talking about?   Here are four common emergencies.

1. You lose your income

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.

How many times have you heard people complaining about unexpected auto repairs?    An emergency fund would be helpful. You could use emergency funds for the car repair and your monthly family budget would be unscathed.

2. Unexpected car repairs

3. Home repairs

Having lived with my parents for 22 years, I'm all too familiar with home repairs. These are not cheap to replace by any means. These are issues you need to plan in advance for. Part of planning in advance is having an adequate emergency fund.

Oh, have I mentioned medical bills are one of the top reasons why Americans file for bankruptcy? Step one is to have great health insurance. Step two is to have an emergency fund on hand. Step three is to try to stay healthy in the first place.

4. Medical problems

Now, how much is enough for an emergency fund?

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

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