Build an Emergency Fund

Dipping into your long-term investments to handle an emergency can play havoc with even the best-laid financial plans. If you don’t want to chance jeopardizing your retirement, consider creating an emergency fund – in an account set aside for life’s uncertainties.

An emergency fund can help protect you and your family against unexpected events such as catastrophic storms, a death in the family, loss of a job, or other unforeseen financial burdens.

Since no one knows when an emergency could occur, your emergency funds should be saved in stable, lower-risk accounts where the money is easily accessible without excessive withdrawal penalties. These types of accounts can include CDs with short maturity dates, money market funds,¹ and savings accounts.   

And since there’s no predicting what expenses you’ll need to cover, it’s widely recommended that you save 3-6 months worth of living expenses.

Developing an emergency fund takes time, and you have to set realistic goals.  Here are some tips to get you started:

• Start with a goal you can live with – perhaps 5 percent of your paycheck
  
• Save through an automatic payroll deduction, so you never see the money
  
• Skip one big expense this year and use that money to launch your emergency fund
  
• Place your emergency funds in an account with no ATM card
  
  

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