Bank News & Financial Literacy
Setting up an Emergency Fund in 2025
Emergencies happen—there’s no way to predict them, but there is a way to prepare for them. Whatever unexpected costs arise; a well-built emergency fund can be your financial lifesaver.
What is an Emergency Fund?
An emergency fund is a financial cushion designed to cover unexpected expenses. It’s a cash reserve that’s specifically set aside for unplanned expenses or financial emergencies. Think of it as your safety net for scenarios like medical emergencies, sudden job loss, or urgent home and car repairs. Having this fund can ensure you won’t need to rely on credit cards, loans, or even withdrawing from retirement funds during tough times.
Why Should You Start One?
Building an emergency fund isn’t just about saving money—it’s an investment in your financial stability and mental well-being. Here’s why it’s worth prioritizing:
- Reduce Financial Stress: Knowing you have funds set aside can help you face emergencies with confidence.
- Avoid High-Interest Debt: A robust emergency fund lowers the need to use credit cards or take out loans when unplanned expenses arise.
How Much Do You Need in it?
Every situation is unique; however, a good rule of thumb is to save enough to cover 3 to 6 months of living expenses. If you’re living paycheck to paycheck, start by saving what you can. Even a small amount can provide some financial security. Set a goal and create a plan for making consistent contributions – regardless of how small. Reserve a portion of your paycheck and set up automatic deposits into your emergency fund. Regularly monitor your progress and be sure to celebrate successes along the way.
Where's the Best Place to Keep Your Emergency Fund?
Where you store your emergency savings matters just as much as building it. Your funds should be secure, easy to access, separate from your regular spending accounts, and protected from value fluctuations. Savings accounts and money market accounts are good places to keep your emergency fund as both offer interest, accessibility, and safety for your funds.
Take action today—and set yourself up with a reliable safety net for the future.
