Your bridge over financial rough spots: Your Emergency Fund

Some topics in personal finance don't get a fun graphic or a witty opener. This is one of them.

One of the most frightening things that can happen to us is losing our income. The reasons for that vary . . . and none of those reasons are fair.

A company closes. AI eliminates a department. A nonprofit loses its major donors. A medical crisis makes it impossible to work. A natural disaster shuts everything down. Governments face shortfalls and positions are slashed.

No way to sugarcoat any of these. Whatever the cause, losing your income is traumatic. It hits you emotionally, physically and financially — often all at once.

And in most of these situations, you had no control over what happened.

A Bridge to Get You to the Other Side

Even if you think you’ll eventually get unemployment benefits, disability payments or other assistance, it can take weeks – sometimes months – for those funds to come through.

How do you feed your family in the meantime?

That question is exactly why an Emergency Fund isn't optional. It's the financial equivalent of a seatbelt. You hope you never need it. You absolutely need to have it.

How Much Is Enough?

If your employment feels very secure, three months of living expenses is a reasonable starting point. If your situation feels shakier, ratchet that up to six months.

Even if you feel completely rock-solid right now, remember that medical emergencies and natural disasters don't check your employment status before they arrive.

Where to Keep It

A CD or high-yield savings account both work well. The goal isn't maximizing returns. The better of the two is a CD since it locks up your money a bit with a slight penalty for an early withdrawal.

But that’s OK! In fact, that’s preferable. Your fund needs to be intact when you genuinely need it. That penalty can remove the temptation to grab money easily if life throw you a minor curveball.

Your emergency fund is for when life throws you a major curveball.

From the Mom and Grandma Side of Me

Spend time with the people in your life. Take care of your health. Invest in your job skills. Prepare for emergencies, not just financial ones.

From the Financial Guide Side of Me

Have money set aside in case the unthinkable happens. If it does, you will have enough to deal with.

Grief. Logistics. Uncertainty.

You shouldn't have to worry about money on top of all of that.

Have an Emergency Fund. Reduce you worries.

I hope you never need it. Build it anyway.