Without an adequate emergency fund, a period of crisis could be financially devastating. Many financial professionals suggest that you set aside three to six months’ worth of living expenses for emergencies. The actual amount, however, should be based on your individual circumstances. Do you have a mortgage? Do you have short-term and long-term disability protection? Other factors you need to consider include job security, your health and income.
While three to six months is a good rule of thumb, at the very least, we strongly recommend that you have one or two months’ worth of living expenses available in a cash equivalent, such as a money market fund.
Also be sure to review your cash reserve periodically. Since personal and financial circumstances often change, you’ll want to make sure your cash reserve fits your current needs/situation. And remember, it’s important to recognize that, once money is withdrawn from your emergency fund, it should be replaced as soon as possible for future emergencies.
If you have questions or need guidance, please contact the experts at Henssler Financial: