Emergency Savings – Financial Literacy Saving Series

Building on the last two posts (found here and here), todays blog post is about emergency savings. It is important to set aside a percentage of your savings each month, ideally you should put aside 20% of your total savings toward your emergency fund. An emergency can have lasting damaging effects on you financially if you are caught unprepared. 

Emergency saving funds are very important, you never know what life will throw at you so it helps to be prepared. Any number of things can happen from illness, divorce, loss of job, or a car accident so it is important to be financially ready for it. In the book Money: What Financial “Experts” Will Never Tell You, the authors suggest thinking about this emergency savings as self insurance. You insure your car and your house so you should have emergency savings set aside for insurance when something unexpected happens.

It is suggested that you have 3-6 months of income set aside and if you can it is ideal to set aside one year of net income. This is you backup so that if something does happen you can weather it and continue to build your long-term savings. Without an emergency savings many people will use their retirement accounts to pay for unexpected emergencies and this can derail you from your long-term goals.

Be sure to visit learnkey.com/financiallitmonth for your free Financial Literacy white papers and other resources, and you can also Like Us on Facebook and Follow Us on Twitter for more daily Financial Literacy tips.