Experts agree that we should all have money put aside in the event of an emergency. Smart people can differ on how much is enough; some say 3-6 months of living expenses, others focus on a dollar amount. You are in the best position to understand your needs, risk-tolerance and any other special considerations. Our How to Save for an Emergency Fund calculator
can help you determine how much you should save based on your circumstances.
If you don't have an emergency fund, it's easy to quickly become overwhelmed. Start small! By saving a small amount every month, you will quickly develop a savings habit. Setting up direct deposit (where you can automatically deposit money from your paycheck into a savings account) or creating an automatic transfer from a checking to a savings account every payday ensures that you are building your emergency fund automatically.
Start your emergency fund with a savings account. They are simple and easy to use. As your account grows, you may want to consider a Certificate of Deposit (CD) or a Money Market account. These accounts have higher interest rates and can make your emergency fund grow more quickly. However, it is important that you keep your fund accessible; don't use these funds to invest in a mutual fund or stock as markets can fluctuate and you could lose money in the short term.