The Importance of Building an Emergency Fund

Most of us thrive and find comfort in the predictability of our day-to-day lives. But unfortunately, life has a way of throwing us different kinds of changes and surprises. From a financial perspective, this could be the sudden loss of a job or unplanned medical expenses. That’s why it’s critical that you should prioritize building an emergency fund.

What is an emergency fund?

An emergency fund is money set aside for unforeseen expenses due to:

  • A job loss,
  • Medical or dental emergencies,
  • Unexpected home repairs,
  • Car troubles

In general, an emergency fund can be used for large or small expenses that are not part of your monthly expenses. It is recommended to have at least three to six months of living expenses saved in your emergency fund.

Why is an emergency fund important?

A life without an emergency fund can leave you vulnerable to financial instability. Without an emergency fund, you may be forced to rely on credit cards, loans, or other high-interest options to cover unexpected costs, which can lead to debt and financial stress.

How do you build an emergency fund?

The most crucial part of building an emergency fund is committing to working on it. Here are some good strategies to build it:

  • Get a sense of your financial well-being. Take a step back and analyze your overall financial well-being. This step is important so that you can reflect on different categories of your finances like your budget, expenses and savings. Try CCCU’s financial wellness assessment.
  • Start making consistent contributions. Include your emergency fund as part of your monthly budget and set up automatic recurring transfers from your paycheck.
  • Monitor your progress. Monitoring your progress regularly can give you encouragement to keep going.

Open an extra savings account!

Building an emergency fund gets you in a better position to weather financial emergencies. CCCU offers different savings accounts that meet your needs. To open your savings account visit us online at www.CCCULV.org.

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