Emergency funds are very popular in the personal finance world. They should be even more popular outside of the personal finance world. It’s always a very good idea to have a small savings stashed somewhere. My biggest dilemma is figuring out how much to have in our emergency fund. The interest rate in our savings account is really low. I only get 0.75% on the savings account at Capital One 360.
Debt – How big should your emergency fund be if you are in debt? You should always strive to have $1000 in a savings account. $1000 will get you through most emergencies if you are a young 20 something year old. The last thing you want is to get into more debt if you have to pay an emergency bill to the doctor or vet.
After Debt – What happens after you get out of debt? Should you build your emergency fund to the equivalent of 6 months of expenses or 12 months? I have seen a lot of personal finance bloggers increase their emergency funds to $10,000 after getting out of debt. $10,000 will equal to about 3-4 months of expenses for us. 6 months of expenses equals to $18,000.
Investing – When you are young, it’s so important to build your investments so you take advantage of compound growth. Once you max out your retirement accounts, is it ok to have a $10,000 emergency fund, and then invest the rest into a brokerage account?
This is where our finances are right now. We can continue to build our savings account, or we can divert some money into a brokerage account.
What would be your advice for a 24 year old?