If there was ever a time that you needed an emergency fund, it’s now. The economy continues to face a number of headwinds, including high inflation, rising interest rates, and the threat of a recession. 

Saving money at a time like this could seem like a daunting task. Or maybe you never thought about the importance of having emergency savings on hand. However, when life tosses you lemons, the best way to make lemonade is to have cash on hand. Being unprepared could be more costly than you think.  

In this article, we’ll explore five reasons why you need an emergency fund and ways to build one. But before we get into that, you might be wondering how much money you should save. The truth is no two emergency funds are the same. 

How Much to Save 

A good rule of thumb is to save enough money to cover three-to-six months’ worth of expenses. By socking away a little each week, you could reach this milestone more quickly than you might think. But if that seems like too high of a mountain to climb, take a different tack. 

Financial experts recommend saving at least $1,000 for your rainy day fund. As you work toward slashing any debts, you could increase the size of your savings. Now let’s find out what these funds are for, exactly. 

  1. Losing Your Job 

Losing your job is one of those things that will change your life. Not only does it affect your personal finances but it can also take some getting used to not having the same routine or coworkers each day. 

This is where an emergency fund could help. You could rely on the money in this fund to cover your expenses while you go on the job hunt. You won’t have to worry about when the first unemployment check arrives if you happen to be eligible for it. Your emergency savings should be used to pay for basic items, like groceries, childcare, etc. Any extraneous items like three content streaming channels should be cut from your budget. 

  1. Health Crisis 

In the unfortunate event of a medical emergency, you won’t have time to plan. That’s why it’s critical that you are prepared for these unforeseen circumstances. Whether it’s a trip to the ER for you or a loved one or the veterinary hospital for the dog or cat, these situations are exactly what an emergency fund is for. At the very least, plan to have enough money saved to cover the deductible on insurance. Other costs associated with this situation could be x-rays or a ride in the ambulance.  

  1. House Repairs 

If you’re a homeowner, you probably know that things could break at the worst possible time. Whether it’s a leaking sink or a water heater on the fritz, home repairs aren’t cheap. A broken window from some backyard batting practice could cost you hundreds of dollars. A leaking roof could set you back closer to $1,000, which could really dampen the mood if you aren’t prepared with an emergency fund.

The truth is, most people aren’t ready for these situations. Most Americans are living from paycheck to paycheck and close to 50% of them wouldn’t be able to afford an unexpected $400 expense, let alone $1,000. This is one club you don’t want to be a member of.  

  1. Automobile Problems 

Car trouble could be one of the costlier setbacks to your personal finances. Whether you find yourself with a flat tire, overheated engine, or broken windshield, you’ll find that repairs like this aren’t always covered by insurance. The money might have to come out of your pocket, ideally from an emergency fund. Car repair bills could be anywhere from $500-$600, on average. Depending on your auto insurance policy, your insurer might not cover 100% of expenses related to any fender benders from an accident, either. 

  1. Too Expensive Not To 

If you aren’t convinced it’s worth having an emergency fund yet, you might want to consider the cost of not having one. Instead of paying cash, you might have to put the expense on a credit card, which increases the cost of the emergency due to the interest you’ll pay to the bank. 

In an emergency, chances are you will be experiencing some level of stress. This could interfere with your decision-making process. If you don’t have an emergency fund to turn to, you could make decisions like taking out a high-interest personal loan to cover an expense. When you take into account any fees or potential penalties, the cost could really add up. 

Ways to Save for an Emergency Fund

  • Calculate an amount: Set a goal for an amount, whether it’s $1,000 or three months, six months, or more of your expenses. If you need to start smaller, that’s okay, too. Try for two weeks’ worth of expenses and go up from there as you can. The important thing is to start somewhere.
  • Make a plan: Your money isn’t going to make its way to your emergency fund on its own. You’ve got to be aggressive about it. Your plan could include earmarking 10% of your income to this fund, as long as it doesn’t interfere with your other savings or bills. If you need to start smaller, that’s fine and work yourself up 1 percentage point at a time. 
  • Use automated savings: If you think that you might find excuses not to save the money, opt into automatically depositing into a high-yield savings account. You won’t have to think twice about it and your savings will grow in the meantime. 


We’ve only scratched the surface of why it’s a good idea to have an emergency fund. But some of these reasons should resonate and show you the importance of being ready for a rainy day. Don’t wait until it’s too late and have to scramble for an emergency loan with high interest. Now you’ve got no excuse.  

An added benefit is that if you continue to save, even after you’ve reached your goal, your savings will only grow larger, opening the door to more possibilities. This will provide greater financial security and give you more peace of mind.