Importance of an Emergency Fund

By Benjamin Temin 

Welcome back to the financial wellness blog series. Past topics have included how to talk about money with kids, teens, and older adults, and all about budgeting. Next up will be a selection of personal financial topics that are important for maintaining financial wellness and having a healthy relationship with your money. 

First up is an introduction to emergency funds.  

Having an emergency fund is one of the most important pieces to building financial stability, and one of the first steps financial professionals often recommend people take to begin improving their financial health and well-being.  

What is an emergency fund?  

Simply put, an emergency fund is a dedicated savings account or other secure and easy-to-access place (not necessarily under your mattress) where you set aside a certain amount of money to cover unexpected expenses. Recommendations vary about how much is a reasonable amount to save, but a good rule of thumb is 3-6 months of household expenses. If you don’t know how much that is, you can start by looking back at your bank and credit card statements from the last couple of months. It is better to be realistic when you are making this calculation and take an honest accounting of all your actual expenses.  

Ask yourself, what do I need to feel financially secure? For some people 6 months will not be enough, and for others 3 months might be plenty. If you are on a very tight budget and that seems out of reach, even setting aside 1 or 2 thousand dollars can make a big difference. Every household has unique needs that should be considered. Your emergency fund will depend on what type of job you have and how stable your industry is. Someone who is an independent contractor or does gig work will generally need to have a larger emergency fund than, for example, a government employee.  

Why is it so important? 

Unexpected expenses are not a matter of “if” but rather “when.” According to the Federal Reserve, about 40% of Americans would not be able to cover a sudden $400 expense without borrowing from family or friends or using a credit card and carrying the balance forward. Often that credit card balance will have very high interest and can easily spiral out of control. Job loss, medical bills, car and home repairs can be even more debilitating. Building financial stability is a delicate process. You might be focused on paying off debt, saving for long-term goals, or just getting by. The emergency fund is like an insurance policy to ensure that you can stay focused on those goals. It will provide a strong foundation for your financial house, so it won’t get knocked over by life’s unpredictable moments.  

If you don’t have an emergency fund and don’t know where to start, there are many resources that can help. For example, Cash Campaign of Maryland, Consumer Financial Protection Bureau , or your local bank or credit union are all good places to begin. If you have a good emergency fund but still feel nervous or anxious about your money, it may be worthwhile to speak to a trusted friend or mentor, or a JCS professional.  

Thank you for reading and stay tuned for more important money topics.


Benjamin Temin is a Coordinator for Economic Sufficiency at Jewish Community Services. 

Jewish Community Services (JCS) is dedicated to providing programs and services that help people of all ages and backgrounds achieve their goals and enhance their wellbeing.  

To learn more, visit jcsbalt.org or 410-466-9200.

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