More often than we would like, we are hit with emergencies, surprises, and events that leave our pockets unprepared. For example, with our health, we are encouraged to have health insurance in order to offer us peace of mind when we are injured or when we fall sick. Now, the medical insurance may not cover all of the costs, however, it leaves us in a better position as the costs incurred upfront would most likely not be as aggressive.

We need to adopt this approach with our finances.

We can bump into emergencies at any moment in our lives. Sickness, deaths in the family, oh or pandemics!

It is, therefore, imperative to set aside a certain amount of money each month towards your emergency savings account. Some people do not like to call it this because we all classify savings accounts differently. Getting your hair done for an emergency work meeting, is not an “emergency.” Purchasing a last-minute Valentine’s gift at a higher cost because you forgot is not an “emergency.”

So, what is an emergency account?

I’m glad you are making a small list in your head of potential things that could genuinely count as emergencies. In times like these, if you had been building up your emergency fund, and now you probably lost your job then you would not be solely dependent on your stimulus check. Touching your emergency fund should be one of your last choices because you are trying to build a solid safety net.

But, I am sure you’re also wondering what exactly makes up an emergency account?

An emergency account consists of a certain amount of money that you set aside from your income in the case of real emergencies. You should typically have money saved in that account that can cover between 6 to 12 months of your daily spending.

This includes:

• Rent + utility costs
• Food
• Travel costs
• Phone bill + subscriptions
• Leisure costs