What is an Emergency Fund?

This past year had a lot of ups and downs for many people – global pandemic, derechos, losing loved ones, losing jobs, the list goes on for many people. 

On a brighter note, there were good things that came with it all too -our communities came together.  Despite so many of our differences, time and time again, humanity proves that in times of hardships, we come together and we are there for one another.

Some of what we experienced as a community, affected us in our own homes and we had to deal with it personally.   Some had damaged property, medical and/or funeral expenses, job loss, etc.  When one experiences these, it’s stressful.  It can be disappointing, upsetting, frightening.  Maybe worst of all, we wonder how we’ll pay for it?

Setting aside a little money to build up an “emergency fund” can help take much of this stress away.  An emergency fund is an account set aside from your general every day “operating” account.  Money is put into it and, in (hopefully) very rare situations, it is taken out only when an emergency arises.

It’s not cash under the mattress.  It is safe and it is secure.  Banks offer savings accounts which are covered with FDIC insurance, your mattress doesn’t.  A good question regarding emergency funds is “How much do I save?”  Short answer: try to set aside at least $500.00 a year, but work your way up to half a year’s worth of expenses. The right amount should cover three to six months’ worth of living expenses.

The right amount for you depends on your financial circumstances. If you are not sure, you can always reach out to your friendly banker.