Jan. 9, 2019
Whether it's a broken appliance or a health issue – life happens – and you need to be prepared for these unexpected expenses that can bust the family budget. But many families don't have a rainy-day fund to fall back on.
Four in ten Americans could not cover an emergency expense of $400, according to the Federal Reserve Board's Economic Well-Being of U.S. Households report.
"Choosing to establish an emergency fund is one of the smartest personal finance decisions you can make," said Matthew Frankel, a certified financial planner who writes for The Motley Fool. "Having emergency savings can prevent you from having to go into debt or tap into your retirement savings, if an unforeseen expense arises."
Your goal: Save enough money to cover six months of living expenses. Don't be intimidated by what may seem like an impossibly large figure – just get started. For example, if you want $1,000 in your emergency fund by the end of 2019, set up an automatic transfer of $40 from every bi-weekly paycheck to a separate savings account that's specifically for your emergency fund. By the end of the year, you will have reached your goal.