Cars break down, medical expenses pop up, and laptops crash. Whatever the situation, unforeseen things happen that require you to need money right away, and it’s important to have enough cash to cover them. That’s why you need an emergency fund.
What is an emergency fund?
An emergency fund money you save and keep aside, ideally in a separate bank account, to cover all or part of the costs of something you’re not expecting. Your emergency fund shouldn’t be part of your long-term savings plan for spring break fun, holiday gift-giving, or your first apartment after college. Instead, an emergency fund is your safety net, only to be spent when financial crises occur. For example, your emergency fund means you’ll have less stress about the cost of hiring a towing service and replacing a flat tire in a car breakdown.
How much should you save?
For graduates and adults out in the working world, the general rule of thumb is to put away at least three to six months’ worth of expenses. So, if after taxes, you take home $1,000 twice a month, you should have $6,000 to $12,000 in an emergency fund.
But if you’re in college, that formula doesn’t exactly work, and saving thousands of dollars can be daunting. Instead of focusing on a final number, just start putting aside money regularly. Even if it’s $25 per month, the money will accumulate over time and you’ll soon have a few hundred dollars set aside.
Where should you put the money?
As stated before, a separate account is best. You’ll be less tempted to tap into your emergency savings to throw yourself an epic birthday party. Savings accounts are a good choice, because you can quickly and easily access the money when you need it.
Check out a Way2Save® Savings account to really get your saving going — you can set up automatic transfers of $25 or more each month, and if you have a linked Wells Fargo checking account, Wells Fargo will transfer $1 from checking to your Way2Save account for each qualifying transaction. You’ll have a reliable emergency fund in no time!