It is important to build an emergency. Here are some tips that point you in the right direction.
Building an Emergency Fund
I have read that everyone should have money set aside for emergencies. How large should that fund be and how do I do it?
Step One - How large of an emergency fund should I have?
Start by determining your current living expenses, making sure to include housing, debt payments and insurance. Next, decide how many months' expenses you want to have in your emergency fund. You may want to start with a goal of six months' expenses and then decide whether you want to save even more.
Step Two - How much do I need to set aside each month to reach my goal?
Use this calculator to learn how much you need to save each month to build your emergency fund.
Step Three - How do I save the money?
An automatic saving plan is a great way to develop the habit of saving. You will come to view that amount as a regular "expense" and may not even notice it is gone from your checking account. Over time, it will add up and that account will probably pay a higher interest rate than your checking account.
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