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Months' expenses in emergency fund

Job losses and the freefall of the U.S. economy during the past two years have put this bit of numerical wisdom to the test. An emergency fund should cover big disasters such as a job loss or time off for medical issues. But right now, so many Americans are struggling just to pay their bills. To many, salting away three months of living expenses seems impossible, let alone the six-month cushion some experts prefer, says Marcia Brixey, author of "The Money Therapist: A woman's guide to a healthy financial life."

One suggestion: Don't put a rainy-day fund in the bank or credit union you use regularly. "It's way too easy to transfer money into your checking account for things that are NOT emergencies," Brixey says. Stash contingency cash in CDs, a savings account or money market account. You won't earn a lot of interest, but it will be easier to access when you really need it.


 

 

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