Determine how much cash you should keep liquid for unexpected expenses
An emergency fund is money set aside to cover unexpected expenses like medical bills, car repairs, or job loss. Having liquid cash prevents you from tapping retirement accounts (which incur penalties and taxes) or relying on high-interest credit cards.
Best Practice: Keep your emergency fund in a high-yield savings account separate from your regular checking account.
Based on your monthly expenses, here's how much you should save:
Minimum recommended for those with stable income, dual-income households, or existing financial safety nets (family support, disability insurance, etc.).
Standard recommendation for most households, especially those with children, mortgages, or single-income families. This is the sweet spot between security and liquidity.
Recommended for freelancers, contractors, commissioned salespeople, or anyone with variable income. Also provides maximum protection in the current high-interest environment without tying up too much capital that could be invested for growth.