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Q: How much money should be in my emergency fund?

A:

Having an emergency savings fund to draw on in the event of some unforeseen financial setback, such as a medical emergency or job layoff, is critical, particularly in uncertain economic times. In case you suddenly find yourself without a steady paycheck you will want a source of cash to tap for living expenses so you aren’t forced to rely on a credit card and fall (or go deeper) into debt. You should aim to build an emergency fund equal to approximately the amount of three months to six months of living expenses. So if rent, food, utilities and transportation costs you roughly $2,500 a month, strive to build an emergency fund between $7,500 and $15,000. If you aren’t currently earning a salary because you are starting a business, you’ll need even more. Aim for 12 months to 18 months of living expenses or, roughly, between $30,000 and $45,000, in this example.

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