Why You Need an Emergency Fund (and How to Build it)
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When you are first starting out with your financial planning as a young adult, there are a two things you should focus on.
- Have a plan to tackle any debt, like student loans
- Build your savings, including an emergency fund
Saving money as early as you can will only help you in the future. It allows you to have a cushion for unexpected expenses and can earn interest to help build your wealth.
As you start to save, it is important to focus on an emergency fund as one of your top priorities.
What is an Emergency Fund?
An emergency fund is meant to be a savings account designated specifically for emergencies. People sometimes use this differently, but I like to think of this as available cash for extreme emergencies.
Think losing your job, a sudden hospitalization, or an illness that leaves you unable to work for a few months. Would you have enough money to survive paying your bills?
It could also be used for unexpected large expenses, such as a hefty car or house repair. If your hot water heater suddenly dies…
