Another Reason to Have a 6-Month Emergency Fund

Tom Healy — Fri, 06 Nov 2009 19:27:09 +0000

As I explain in my book, it is imperative that you maintain an emergency fund of at least 6-months of your living expenses in liquid cash savings. If you aren’t there at the moment, then create a systematic savings plan that will get you there ASAP. The two main reasons for establishing this emergency fund are emergencies and opportunities. Emergencies could include a loss of income, short-term disability or needing to take off an extended period of time from your career for your health or someone else. Opportunities could include starting a new business or making a wise investment in another business.

With all of the current volatility in the job-market, keep these statistics in mind if you don’t feel like a 6-month emergency fund is important for you:

Percentage of unemployed workers out six months or longer (by occupation)

Management – 32%

Professional - 30%

Sales - 31%

Service - 32%

Also Note: 24% of workers ages 25-34 who lost their jobs earn less in their next position.

On second thought, maybe 6-months isn’t nearly enough. It’s easy to say “this would never happen to me” and “my job is safe”, but some crazy things are going on these days and the worst has yet to come. The unemployement rate is about to surpass 10% soon according to the White House. Bottom line is to establish your emergency fund and play it safe, regardless of your situation.

Tom Healy » Financial Management

Another Reason to Have a 6-Month Emergency Fund