# Emergency Fund Explained. How Much Money Should You Really Save for Emergencies?

Life has a funny way of choosing the worst possible time to become expensive. Your car can break down just before payday. You can get a medical bill even after you pay your rent. You may lose your wages or a major income stream may be cut off.

This is exactly why an emergency fund matters.

Emergency funds are savings that you have set aside to cover unexpected costs and emergencies. It provides that peace of mind when life doesn't go your way. More significantly, it can avert an unpleasant situation into a severe financial crisis.

So, what should the amount of savings be?

A typical guideline is to save three to six months' worth of living expenses. If your basic monthly expenses are $30,000, then you might want to shoot for $90,000 to $180,000.

But that does not mean everyone needs to have hundreds of thousands of dollars saved immediately. The size of your emergency savings account will depend on your income, job security, family commitments, debt responsibilities, and monthly costs.

It may be more comforting for you to have a bigger emergency fund if your income isn't steady or if more than one person relies on you financially. If you are able to support yourself financially and have not many other financial obligations, you might feel confident to begin with a lower amount.

The key is to get it started.

The number one mistake that people will make: assuming that they can't save because of the recommended amount. If $100,000 is too high of a price tag, please take a break from the number for a second. Start with $1,000. Then aim for $5,000. Then start working towards saving for one month of living costs.

It is not necessary to create your emergency fund in a single night and day. Regular, manageable payments can add up over time.

Also, it is essential to know what your emergency fund is going to be used for. Items you want that are not emergencies include a weekend trip, new clothes, a restaurant bill or the latest phone. Only use your emergency savings for times that are truly financially stressful.

Consider your emergency fund as your financial breathing room. It allows you to consider your options rather than making rushed financial choices in the event of a problem.

You may not be able to predict your next emergency, but you can prepare for it. Begin where you can now and increase as you go. Financial security is not a matter of having the right amount of money. It means having a place to fall back on when it is needed the most.