Keep-Safe Money: Your Emergency Fund

The story: Two cracked screens

Maya pays for a phone repair from an emergency fund, while Alex puts the same repair on a credit card and a debt meter rises.

1. Narrator: Maya and Alex both drop their phones the same week. Both screens crack. Each repair costs $150.
2. Maya: I have $300 in an emergency fund. I’ll pay for the repair and refill the fund over the next month.
3. Alex: I don’t have savings. I’ll put it on a card and pay it off… somehow.
4. Narrator: Maya’s surprise became a hassle. Alex’s became a debt, with interest each month it isn’t paid off.
5. Narrator: That’s what an emergency fund does. It’s keep-safe money for real surprises, kept separate and easy to reach.
6. Alex: I’ll start small: $10 a week until I have a starter fund.
7. Narrator: Surprises are certain. Be ready.

What you’ll learn

1. What counts as an emergency

   An emergency is needed, urgent and unexpected. Think of a broken phone you need for work, a sudden medical bill or a lost job. A sale, a concert or a trip isn’t an emergency. Those are things to plan and save for separately.

2. Start small, then grow

   Many people start with a small starter fund for minor surprises. Then they grow it toward a few months of needed expenses. Any amount helps, and the right size depends on your life.

3. Separate and easy to reach

   An emergency fund works best kept apart from spending money, so it isn’t spent by accident. It still needs to be easy to reach in a day or two. Liquidity means how fast something turns into cash. An emergency fund needs high liquidity.

4. Use it, then refill it

   Using the fund for a real emergency is the whole point, not a failure. Afterward, refill it a little at a time, the same way it was built.

Key words

emergency fund

money saved for real surprises (the kid word was keep-safe money)

Also called: cash reserve

liquidity

how fast you can get cash

Common questions

How big should an emergency fund be?

Many people start with a small starter fund, then build toward a few months of needed expenses. The right size depends on costs, job and who depends on you.

Remember this

Surprises are certain. Be ready.

Try it: Size an emergency fund

1. Open the emergency fund calculator.
2. Enter the sample budget: an example $700 a month of needed expenses.
3. Note a starter amount and a bigger goal.

Put the sample budget through the emergency fund calculator embed.