Financial planning experts have all agreed that if you want to be financially stable you should have emergency money. The reason that you need an emergency fund is because unexpected events occur and if you don’t have a fund for this purpose, you will have to resort to credit cards or take out a loan and you will be in debt.

How Should You Get Started?

Set up an emergency fund and put regular monthly amounts into the fund. Most experts agree that everyone should have at least three months’ worth of living expenses in their emergency fund. However, if you have six months to one year’s worth of expenses in your emergency fund, this is even wiser.

You have to save your money if you want to achieve your financial goals.  Your personal circumstances and financial goals will be the determinants on how cautious you want to be when you get started. For example, if you have parents who are financially stable who can help you when you are in a financial bind, then putting away three months’ worth of monthly expenses in an emergency fund may be all you need to do. However, if you use lines of credit or credit cards to get help you during a financial crisis and end up paying a high interest rate, your emergency money should be equivalent to at least six months’ worth of living expenses.

However, if you have a dilemma like if you should pay off your credit cards or put money into an emergency fund or put your money into other investments, it would probably be wiser for you to pay off your credit card debt first. Then contribute to your saving vehicle like a 401(k). If you put money into a 401(k), you will have the ability to borrow from it if you need to do this. After you have paid off your credit card debt and establish your 401(k), you will go back to your emergency fund project.

If you cannot put the amount of money that you have decided into your emergency fund, you can put less but you should start saving your emergency money. If you set aside a percentage of our take home pay, you will accumulate one month’s worth in no time. For example, if your living expenses are $2,000.00 per month, you will be able to accumulate one month’s worth of expenses in a little less than a year if you put away 10% of your pay check each month. You should set up an automatic transfer from one bank account to another account such as a saving account so that you will not have this money sitting in your regular account to tempt you into spend it.

Another thing that you should do is take a look at your spending habits and cut back on things that you really don’t need to spend  money on. If you receive a yearly bonus, you can put this money into your fund or if you get a promotion, then the extra money can also go to your fund.

Where Should You Keep Your Cash?

Just remember that an emergency fund is to be used for one purpose only, an emergency.  So, your money should be easily accessible. One thing that you should not do is to invest your money in stocks because stock values changes all the time.  Your money should go into a saving account or a money market account so that you will have access to it when it is needed.

Take a good look at the terms and minimum balance before you decide on which one you is right for you.

Since you will not have your emergency money tied up in the stock market you will have peace of mind and your funds will be easily available for you when you have an emergency. Learning how to manage your money will go a long way in you savings for an emergency.