Unfortunately, emergencies happen. It’s a fact of life. However, the good news is that we can prepare emergencies – and how important it is to do so!
Everyone should have a certain amount of money in their emergency fund; how much money, is the question that will be answered here.
As you’re working through the Foundation Phase in your financial plan, you’ll begin with $1,000 in cash as your short-term emergency fund. This is a great starting point, and it will help you handle all of those small emergencies you might encounter as you’re putting in place appropriate insurance policies, creating your estate plan, and paying off all your consumer debt.
Once you’ve accomplished all of these goals, it’s time to create an additional emergency fund that you will fill with three to six months of living expenses. What amount should you choose? Let’s take a look at the Four-Question Emergency Fund Calculator.