Life sometimes throws unexpected curves or unplanned expenses which can affect our finances and put  one in a mess. Here’s how having an emergency fund can help, how much to save and the situations that warrant using it. 

What is an emergency fund?

Emergency fund or rainy day fund is a stash of cash you set aside to cover emergencies or unplanned financial expenses. It is a financial cushion when life takes an unexpected turn.

 Why an emergency fund important

Your emergency fund is the shock absolver between you and life when you experience

  • Loss of job
  • Auto theft or car breakdown 
  • Unexpected home repairs
  • Medical crisis  


How much you need to have in your emergency fund

A good emergency fund goal should be to keep 3 to 6 months of your living expenses. The money should be used for a real financial crisis, not when you want to buy a new pair of shoes or a new dress for your best friend’s wedding.

How to get started 

If you are considering starting one, here are what you can do:

Step 1: Figure out how much you need to have in your emergency fund

Step 2: Open a separate savings, preferably a high-interest savings account 

Step 3: Pick a daily, weekly or monthly savings goal

Step 4: Start small if you must but keep going! 

Step 5: Regularly reevaluate your emergency fund anytime you have a major life change(like a salary increase, bonus or an addition to your family)

If you use your emergency fund for a truly unexpected expense, reup your contributions once you’re financially stable. 

How to achieve your emergency funds goals

  • Save bonus or any other spare money in your emergency fund
  • Start a budget and cut down on unnecessary expenses
  • Make having an emergency fund a priority. 
  • Set  up automatic transfers for your fund until you reach your goal
  • Keeping it in a high-interest savings account


Remember, your emergency fund should be in a savings account, safe and easy to access in your time of need but not so easy that you’ll dip into it on a whim.