The goal is to save enough to keep you afloat for several months, but the important thing is to just start saving. If you can’t put away $500 per month, aim for $100 or even $50. Every little bit helps. Because you may need to access the funds at a moment’s notice, it’s imperative they can easily be withdrawn without penalty. Don’t invest emergency funds in a certificate of deposit (CD) or IRA. Choose an interest-bearing savings account instead.
As your emergency fund grows, resist the temptation to tap those funds for everyday expenditures or fun discretionary spending, like a tropical vacation or a flashy new sports car. If an emergency arises, however, don’t be afraid to make use of your emergency fund. After all, that’s what it’s there for. Just remember to replenish those funds once you have your finances back on track. As soon as you are able, resume saving for that rainy day because there’s definitely going to be another one – maybe sooner than you think.