TEMPLE, Texas — When talking about finances, it's very common to hear the term, “Emergency Fund." How much should you save? Turns out, it's different for each person.
So what are the go to rules and goals for an emergency fund?
Well, according to Consumer Finance, an “Emergency Fund” is a cash reserve that's specifically set aside for unplanned expenses or financial emergencies.
Some common examples include car repairs, home repairs, medical bills, or a loss of income.
So how much should you save?
Certified Financial Planner Rolandus Johnson gave us his "Rule of Thumb."
"Having an 'Emergency Fund' and my 'Rule of Thumb’ is three- to- six months of living expenses, for anything that you can't go without. Have that put aside that's easily accessible whether it's a money market account or a savings account with your bank, but it's easily accessible and if there's something that, say you need $6,000 to fix whatever, you can go get it within minutes," he said.
And remember, your fund should not be a credit card or investments that you would have to sell in order to get the cash that you needed, he said.
"Always have that 'Emergency Fund' that is not affected by any market or any news that is going on. So that you can get the money really, really quick," he said.
For each person and each family, the amount of your “Emergency Fund” will vary, depending on how you choose to personally live your life.
"How much money do you feel, or how much money to have in the bank do you feel safe sleeping at night with? It's a question that I ask most of my clients, if you had to pick a number in the bank, that you'd feel safe where you say, ok everything is ok," he said. "That's the number that you want to aim for to put in your savings or money market account."
Let those number set in. The average American in 2020 had just shy of $66,000 saved in retirement accounts. Those same people had on average $5,300 in their checking and savings accounts.
Watch more 'Money Talks' below: