How Much Money Is Enough For Your Emergency Cash Fund

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coins.jpgNow more than ever the idea of an emergency cash fund is critical.  Many personal finance gurus recommend that individuals and/or families put aside at least 3 months of living expenses in a conservative vehicle (such as a CD, money market fund, or traditional savings account).   Living expenses include: mortgage, taxes, utilities, food, gas, and car payments.  

An emergency cash fund is a must in any economic environment (including good times) as you never know when you may lose your job, need to make an emergency home repair, etc.  I also believe that establishing an emergency cash fund should be done early (that is, within the first six months of your first job) and ahead of any other money matter (even before funding your 401K).  Having cash at the ready provides a sense of security and freedom and also builds discipline in terms of saving for the cash fund.

I like to have well over 3 months of emergency cash on hand and I would recommend an amount closer to 6-9 months of living expenses.  Look for an online money market fund via ING or Vanguard and connect it with your checking account (this way transferring money to your emergency fund is easy and convenient).

2 Comments

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