Why Emergency Funds Should Be a Priority

These days, being burdened by debt is almost a guarantee for college graduates before even earning their first paycheck. So why should building an emergency fund become a top priority? In a way, it makes financial sense to pay off student loans as soon as you land a job. Right?

Ignoring your debt in order to focus on saving is a bad idea, too. It can mean having to pay off debt and its compounding interest way into retirement. So how do you balance between debt repayment and savings?

What is an emergency fund and why do I need it?

An emergency fund is money stashed away for emergencies. Think of it as a safeguard for when something unexpected happens, saving you from having to take out another loan or racking up on credit card bills.

The size of your emergency fund is a personal matter, but there are some general rules you can follow. CNBC’s expert guide on emergency funds recommends starting with an aim of saving $2,467 for low-income households.

How much should I put into my emergency fund?

Due to its nature, an emergency fund should be liquid, but that doesn’t mean you should be hiding money in a piggy bank. It’s best to separate it from your checking or main savings account. Two popular options for doing so are high-yield savings accounts and money market accounts.

Where do I put my emergency fund?

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