Emergency Funds: For a Rainy Day – Napkin Finance

Emergency Funds
For a Rainy Day

July 9, 2020
Emergency Fund

It’s a fact of life that bad things—especially of the financial variety—sometimes happen to good people. That’s why you need an emergency fund.

Emergency funds are buffers between you and life. When the plumbing bursts in your newly purchased home or a sudden illness leaves you with steep medical bills, you need money fast. If you have an emergency fund, you can dip into it rather than your long-term savings or retirement funds—or worse, using credit.

What emergencies are not…

Your emergency fund should cover truly unexpected, urgent expenses. Here are some costs that don’t make the cut:

  • Vacations, concert tickets, or eating out
  • Annual car registration and other recurring bills
  • Home repairs or improvements that aren’t true emergencies

The rule of thumb is to have three to six months of expenses in an emergency savings account. Struggling to sock away that much cash? Look to financial windfalls like your tax refund or annual bonus to get the ball rolling.

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