We've discussed before how important it is to have an emergency fund to rely on in case of job loss, illness or unexpected expenses. When planning, choose the events carefully to save for, otherwise you'll wind up over-saving for things that won't happen — at least not at once.Remember that an emergency fund is an insurance policy you hope to never cash out. If you need it, you'll be glad it's there, but if you over-plan you may lock up money that's better served in investments. Moolanamy proposes you start by saving for job loss and medical emergencies, and we agree.
From there, be careful: stash the deductibles for your home or car insurance policy, not the cost of a new car or major repairs to your home. Think of events that are probable based on your lifestyle, but don't go crazy trying to save for every eventuality.
How did you choose what to add to your emergency fund and how large it should be? Share your experiences in the comments.
How Big Should Your Emergency Fund Be? [Moolanomy]