Key Takeaways

• Save at least 3 to 6 months' worth of essential expenses by funding your emergency savings account regularly, as you would pay a bill.
• Try to save in an account that pays some interest but preserves liquidity.
• As a last resort, credit could be used to cover an emergency, ideally with a low interest rate.
• Be sure to have adequate health and disability insurance coverage.
  

Several banks closed suddenly in March, sending a shudder through the banking industry and the stock market. That followed months of tech sector layoffs, high inflation, and rising interest rates. What could come next? Nobody knows.

It's a great reminder that there's a lot out there that can upset your plans, so it makes sense to prepare for the unexpected with an emergency fund. An emergency fund is cash you keep in reserve for a serious unexpected predicament like a job loss or a catastrophe that isn’t covered by insurance. Building up your emergency savings can help you protect yourself and your loved ones—and earning a little bit of a return on your savings can help protect your future purchasing power.

Here are answers to 5 common questions about emergency funds, including how big your emergency fund should be and where you could consider keeping your emergency fund..

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