- How do I lower my expenses?
- Why and how should I save money?
- Planned and unplanned expenses
- Emergency Fund: What It Is and Why It Matters
Savings are like a guardrail for your financial plans – they ensure that even if something unexpected happens, your plan remains in place and you are still building a better financial future.
Emergency fund
If you are following the 50/30/20 rule for budgeting, you are already setting aside 20% of your income for savings. Now, let’s break that down even further. We already know that having an emergency fund is essential to protecting all aspects of our budget. An emergency fund is where most, if not all your savings should go until that fund reaches its intended amount.
The recommendation is that your emergency fund has three to six months' worth of living expenses/needs in it. Expenses like dining out and entertainment should not be included in this calculation, as they can easily be eliminated in case of an emergency.
