Emergency Fund

Last Updated Apr 15, 2009 3:13 PM EDT

How to set up an emergency fund

An emergency fund is an easily accessible stash of money you can tap if you lose your job, get sick, or run into immediate, unexpected expenses — like a blown gasket — so you don't blow a gasket. Maintaining a cash cushion will help you ride out rough times without piling up debt and will protect your long-term financial health. You'll want to keep your emergency fund in a safe account where the value won't fluctuate with the vagaries of the stock or bond market, such as a savings account or money market fund. This way, the cash will be there when you need it.

Most financial advisers recommend creating an emergency fund worth at least the equivalent of three to six months of expenses. You probably can't set aside that much money overnight. Instead, seed your emergency fund a little at a time, perhaps by arranging for small automatic transfers from your checking to savings accounts.

The links below offer strategies for freeing up cash for your emergency fund plus advice on where to safely and conveniently keep the money.

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  • Get a Higher Rate on Your Emergency Savings

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  • Today's Best Rates

    Bankrate.com will find you the highest yields available on checking and savings accounts so you can earn the most possible in your emergency savings fund. You can search by the type of account and the amount of money you'll keep in the account.