⏱️ Time: Setup once | 🎯 Difficulty: Beginner | 📈 ROI: Quick Win | ✅ Status: Active
Emergency Fund
37% of Americans can’t cover a $400 emergency [@fed2024]. They’re one car repair away from debt spiral.
An emergency fund is the foundation. Build it before investing.
The Target
| Situation | Target |
|---|---|
| High-interest debt | $1,000 mini-fund first, then attack debt |
| Stable job | 3 months of expenses |
| Variable income / single earner | 6 months of expenses |
| Self-employed | 6-12 months of expenses |
Expenses = rent + utilities + food + insurance + minimum debt payments. Not income.
Where To Keep It
High-yield savings account. Currently 4-5% APY. Not invested. Not locked. Instantly accessible.
Don’t optimize returns here. This is insurance, not investment. Liquidity matters more than yield.
The Build Order
- $1,000 starter fund — Stops small emergencies from becoming debt
- Pay off high-interest debt — Can’t build wealth while paying 20% interest
- Full emergency fund — 3-6 months expenses
- Then invest — Now you’re ready
When You Use It
Emergency = job loss, medical bill, car repair, essential home repair.
Not emergency = vacation, new phone, “good deal” on something.
After using it: Pause investments, rebuild fund to target, then resume investing.
An emergency fund turns a crisis into an inconvenience.