We see the word “emergency fund” thrown around in personal finance. Professionals usually disagree on their use and how much money we should have in one. A lot of people also disagree on where to store it (hint: not under your mattress). In this post, I am going to try to address these questions from the perspective of financial independence. Specifically, I am going to address the following questions:
- What is an emergency fund?
- What isn’t an emergency fund?
- How much money should you have in it?
- Where to keep your emergency fund?
Before diving in, I want you to understand something important. This is an opinion post. Ultimately, your definition of “emergency” will differ from mine. I follow a very strict set of guidelines for my emergency fund, but it doesn’t mean you have to. With that, let’s dive in!