An emergency fund is used to protect an individual or a family in the case of a job loss or an illness within the family that can lead to a loss in paycheck, or a loss in money that is coming into the household. Through the use of an emergency fund, the individuals or families should have access to at least three to six months worth of expenses (this means all expenses, fixed and variable included) deposited into a high yield savings account that can be used to offset the reduction in income that comes with a job loss or a change in the financial situation.
An emergency fund should be created for every individual or household, especially within this economy. Through the use of an emergency fund, protection is ensured in case of an emergency occurring. Adding funds to the emergency fund on a regular basis, as the routine should be developed which can allow the individual to contribute to the fund through part of the original monthly budget. Creating a regular contribution schedule can help to create the emergency fund quicker than other means and allow for security to occur quickly.