The Emergency Fund is used to meet unexpected expenses, such as, medical expenses not covered by insurance, major repairs to an auto or home, breakdown of household appliances, or loss of income due to prolonged unemployment or disability.
A good rule of thumb is that a consumer should put away three to six months worth of living expenses into an interest bearing account. This is why preparing a budget is very important as we discussed earlier. You can pick your living expenses directly from your budget. You can estimate most of the other emergencies and get the decuctibles from your insurance policies.
Our Emergency Savings Calculator does an excellent job explaning what emergency savings is and helps you determine how much you may need.
Having adequate emergency savings can make unforeseen unemployment, auto repairs, medical emergencies, property damage and even legal issues more manageable. With adequate emergency savings, you can focus on how to best meet your family's needs, rather than worrying about finding the money to handle these difficult situations. This calculator helps you determine how much emergency savings you may need, and how you can begin saving toward this important goal.
Please study the illustration and read the definitions.