Good Financial Reads: Emergency Fund 101

What is an emergency fund?

Your emergency fund is the amount of cash you have in a safe place to cover an unexpected expense (such as a car repair) or event (such as a layoff). You should always aim to keep the money in this account untouched unless an unforeseen event occurs.

These days, it seems everyone has one big question on their minds:

What should I be doing with my money right now?

The economy is at a standstill, unemployment claims are soaring, the market continues to feel shaky after its recent fall from the peak, events from now through the end of the year are postponed or canceled, and nothing feels certain right now.

One of the most difficult things to bear in personal finance is when you’re meeting all of your goals and then tragedy strikes. It happens to everyone inevitably - maybe your car breaks down, you need a new roof on your house, or there’s an unexpected medical bill. 

The key to getting through these situations unscathed is to prepare for them ahead of time. With a certain finance trick, you’ll be able to cover these unexpected expenses and still meet your financial goals. 

Everyone knows that you should have 3-6 months of basic living expenses in emergency savings. (Right? Well, if you didn't, now you do.) But -- where should you keep the money? When should you use it? Where does it fit in your overall portfolio? Can you invest it? Does everyone really need that much in emergency savings, or are there exceptions?

All good questions. Welcome to emergency savings 201.