If you don’t have an emergency fund, several of our experts said it’s a good idea to start one, even if you can just sock away a small amount every month. If you have an emergency fund, good for you — but chances are there’s not enough in it.
“I think the single most important thing someone can do right now for their financial life is to make sure they have an adequately funded emergency fund,” says Jim Wang, blogger at Bargaineering.com. In these days of still-high unemployment, the old rule of thumb about having three months’ worth of expenses no longer applies. Instead, Wang says shoot for six months at a minimum, and as much as a year if you think your job is in jeopardy.
“The key is to be able to manage emergencies from savings, rather than having to liquidate your retirement account or leaning on a high interest credit card,” Wang says. “Trying to resolve an emergency with a credit card can lead down a
dangerous path of debt.” Keep your emergency fund in a high-yield savings account separate from the account you use for everyday expenses.