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An emergency fund can best be described as a fund that you set up to take care of your day-to-day or living expenses at a time when your normal source of income is disrupted. Examples of such an emergency could be an illness that outlasts your paid sick leave or when you are unexpectedly retrenched.

Or maybe you have some emergency situation like accident, hit by unexpected disaster.
It will not provide you full solution but at least You can use your emergency fund to tide you over until you can get up and start again.

So how big emergency Fund that you need?
Some financial adviser said we need 3-6 months of our daily expense but some said we need 6-12 months. The amount is depend and what you need, for example if you are single will have different need than if you are married with one income, or married with two incomes. For people who have secure job will put a smaller amount of emergency fund rather than who have unsecure job. So we have no exact amount of emergency fund that we need.

So what we must do to put a good amount for our emergency fund
Some articles that I read suggest that $1000 can be a baby emergency fund. That will help you not use your credit card for paid some unexpected small emergency
such as small car repairs, small home repairs or small medical bill

Then what else that we must considered for emergency fund
* start to count your monthly expenses with go over your past 3 month of bill that will be include (mortgage payment, utilities, groceries, insurance, other expense,
property tax and discretionary expense and yearly expense)

* measure your needed with rule of thumb you should have 3-6 months of living expense. Just in case if you lost your job and it will be hard to
get a new job, and you are the only one who support your family you need to have 6 months until a year saving.

* If you want to find a place to put your emergency fund, consider an important key that you must be able to easily access your emergency fund should the need arise, without incurring expensive penalties. Some of the financial products you should look at to set up your emergency fund include bank investments, money market funds and, in certain circumstances, endowment policies

* revisit your emergency fund once a year and consider upping the amount if life events - like a new baby, new house or new salary - have increased your spending.
Resist the temptation to use the fund for anything other than unbudgeted necessary expenses

source :

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  1. 30ats  

    April 30, 2009 at 11:26 PM

    yeah, i'm working on my 3-6 month emergency fund -- but it's damn hard. hahaha

  2. azarre  

    May 1, 2009 at 9:33 PM

    nice post broo...

  3. online writer  

    May 3, 2009 at 6:01 AM

    very helpful information.i'm now close to my 3-month emergency fund hehe.

  4. Melissa Q.  

    May 5, 2009 at 9:18 AM

    I believe it is a very good idea to have an emergency fund. It's best to even keep the funds in a growing account so that you make interest on it. Great idea.