Focus on Finance: Establishing an Emergency Fund

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Planning ahead and creating an emergency fund is one way to give yourself a buffer from financial burdens and peace of mind by expecting the unexpected. There are important links between money and mental health. Understanding how they affect each other can help you achieve better financial and mental health.

What: An emergency fund is designed to protect you against unexpected expenses.  These could be a serious illness or a very big home repair.  To prepare for these types of events, it is important to save between 3-6 months’ worth of expenses depending on your situation. Use this calculator for a guide.

Who: Everyone needs an emergency fund!  Currently stable finances can become unstable quickly.  Natural disasters, a shifting economy, a split from a partner would all be times when an emergency fund could be used.  An emergency fund is invaluable for increasing the number of options available during bad times.

Where: Your fund should be held in an easily accessible account, such as a savings account.  

When: The sooner you can gather and have available your emergency fund, the better!  Also, make sure you replenish the fund when used or as expenses change.

How: 3 – 6 months of expenses is a lot of money!  If you are wondering about how to save for it, consider these ideas:
  • Start small - anything is better than nothing, and every cent counts!
  • Automate: allocate a reasonable amount from each paycheck to your emergency fund 
  • Add a portion of your tax refund to the fund
  • Add some of the “extra” paycheck during a three-paycheck month

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