Emergency funds are important for financial security because they give you money you can use in an emergency, like when you get sick and have to pay huge medical bills or when your house or car breaks down.
If you don't have an emergency fund, you might have to borrow money on your credit card, which could take years and cost you a lot more in interest.
But if you save an extra $30–$50 every month in a “emergency savings account,” you can be ready for any emergency that may come up in the future. When doing this, it's best to think of the emergency fund as an extra bill that needs to be paid on time every month.
Yes, you can and should make a budget and put the extra money into an emergency fund. This is a very important part of your "financial future." Here, the goal is to save money by making a budget for your income. The emergency savings should be enough to cover your living costs for at least three months.
The important thing is to save a certain amount of money every month and only use it for true emergencies.
Unlike an investment, the success of long-term savings doesn't really depend on how much money you get back or how much interest you earn. Instead, it depends on how consistently and regularly you save a set amount of money so that you always have it on hand.
No matter how much money you have or don't have, the first step in building an emergency fund is to figure out where your money is going right now.
When someone knows and figures out where they spend their money, it's easy to choose and decide where to cut back on spending. To put it another way, budget.
When you make a budget, you put money aside for both planned and unplanned uses in the future. Here is where you set a goal to save money. So make your goal an emergency fund.
Checking, savings, money market, and "certificates of deposit" accounts are all good places to keep cash that you might need quickly.
You can put the money you save by making a budget toward your savings goal, your emergency fund, or both. One way to use the money saved by making a budget is to put half of it in a savings account and the other half in an emergency fund. This way, you can reach your savings goals and put money away in case of an emergency. It's up to you.
