How Much Should I Have Saved in My Emergency Fund?

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As emergency fund can be a lifesaver in times of financial trouble.

The pandemic has taught us the importance of being prepared. However, 37 percent of Americans aren’t confident they’ve set aside enough savings for emergencies, according to a recent survey by the National Endowment for Financial Education. If you don’t have an emergency fund or aren’t sure if it’s large enough, here are steps to build one quickly, from your financial partners at Benchmark Federal Credit Union.

What Is an Emergency Fund?

An emergency fund is your personal insurance policy when a financial crisis strikes, with savings held in a separate account that’s reserved exclusively for emergencies. It can better prepare you for an unforeseen expense or loss of income and is a safety net to help when a financial crisis occurs. 

How Much Do I Need for Emergency Savings?

Your goal for emergency fund savings depends a lot on your income and spending. Most experts suggest an emergency fund should have at least three to six months of living expenses. This would include everything you might need to pay mortgage or rent, utilities, food, debt and loan payments, insurance payments, educational expenses, transportation, and other monthly personal expenses and activities.

The more you earn, the more you should stash away. If you have a family to support, take that into consideration when determining your savings goal. If you can expand your emergency savings beyond six months of expenses, you’ll be even better prepared. This is a good idea if you’re in an industry where layoffs are common, or you don’t have a steady income. You should also aim for a higher amount if you or someone in your household has a chronic illness that may require extra medical care or more frequent medical visits.

Three Easy Steps to Building an Emergency Fund

  1. Determine your emergency fund financial goal. Adjust your goal if your situation changes.
  2. Decide on the amount you can save each month as determined by your budget.
  3. Open and set up automatic payments into a dedicated emergency fund savings account each month.

Central to a successful and sustained emergency fund is replenishing your account if you’ve dipped into it. If you’ve had an unexpected and expensive home repair that put a dent in your fund, you need to replace the money to get the account back up to your goal amount.

Ready. Set. Start Saving for an Emergency Now!

Fewer than 4 in 10 Americans have enough money set aside to cover even an unexpected $1,000 expense, such as a trip to the ER or a car repair, according to a nationwide survey conducted by Bankrate. Even fewer people have months of expenses saved.

Saving for an emergency when you’re on a tight budget might seem like an impossibility. However, even if you only have a small amount to contribute each month and the task seems daunting, you will be working toward your goal of security in the event of an emergency. Benchmark Federal Credit Union has savings options for your emergency fund needs, from Basic Savings to High Yield Money Maker and Money Market Accounts at www.BenchmarkFCU.org. If possible, emergency savings are best placed in an interest-earning account that can be easily accessed without any penalties.

Once you’ve hit your emergency fund savings goal, you can stop saving and feel secure in the fact that you have a safety net when the unexpected occurs. Use it only for emergencies, not for a tropical vacation, or to buy that new TV you’ve been eyeing. For those types of purchases, we recommend a low-interest personal loan like our Winter Wishes Personal Loan, with rates as low as 6.99% Annual Percentage Rate. This can also be a great option for holiday shopping and debt consolidation.

Rebecca Worthington is the Vice President of Community Relations at Benchmark Federal Credit Union. The only federal credit union to exclusively serve Chester County, Benchmark was named Business of the Year by the Greater West Chester Chamber of Commerce and honored with the 2021 Corporate Partner Award by Arc of Chester County. For more information on credit union eligibility and protecting your financial well-being, visit BenchmarkFCU.org

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