Unfortunately, life comes with complications and unexpected surprises.  If your car broke down or the water heater in your house quit working, how would you pay for the repairs?  If you had a car accident, do you have the money to pay the deductible?  What if you lost your job … how much savings do you have available to live off of?  This is when you would need an emergency fund. 

How much of an emergency fund do you need?   For most people, start with a $1,000.00  that is reserved ONLY for emergencies.  In the event there is a legitimate emergency that requires you to use money from your emergency fund, pay the emergency fund back as soon as you can. 

Once you get a grip on how to save money, you can start adding to that original amount.  Eventually, you will want to add to your emergency fund so that, ideally, you can build up a reserve that would cover essential household costs for at least six to eight months.