In the wake of the COVID-19 pandemic, economies all over the world have been upended. If you didn’t have to dip into your emergency funds, you’re quite lucky. No matter how you saved during the pandemic, or how hard it was to make ends meet, COVID-19 changed the way Americans earned, spent, and saved money.

You may have heard that you should have three to six months’ worth of essential living expenses saved. Although it is good advice, it may not be the first thing you want to hear after a year and a half full of emergencies.

What’s An Emergency Fund?

An emergency fund is a savings account that serves as an extra layer of security when the unexpected happens. Unexpected hardships such as job loss, divorce, or debilitating medical issues all fall under the ‘disaster fund’ umbrella. An emergency fund creates a safety net that allows you to navigate financial hardships without having to take out high-interest loans, take on debt, or dip into retirement funds.

Why Is Having An Emergency Fund Important?

During the COVID-19 pandemic, you have experienced first-hand the importance of having a reserve fund available. Nevertheless, if things are still tight, you may wonder whether now is the right time to rebuild savings. The short answer is yes. The sooner you rebuild your buffer, the less likely it is that you will fall behind and open yourself to further problems, such as high credit card debt.

How Much Money Should I Have In My Emergency Fund?

A good rule of thumb is to set aside 3–6 months’ worth of non-discretionary expenses i.e. housing, food, debt, utilities, transportation, health insurance. Expenses incurred for vacation, dining out, entertainment, and other savings goals don’t need to be included. You can then use the factors and questions below to determine a more personalized length of time.

  • Economic Environment

What is the unemployment rate? If you were to lose your job, how long would it take you to find a new one?

  • Professional Environment

Is your specific industry (or role) in high demand? Are there other positions available in your locality? Would you be able to work online? Would moving be necessary?

  • Risk Tolerance

How much risk are you willing to take? How many months of living expenses would you need to feel comfortable? What about your spouse, if applicable?

  • Insurance

Are your insurance policies up-to-date? How will the benefits help you meet your expenses?

Where Do I Keep My Emergency Fund?

When setting up your emergency fund, keep in mind that you need to keep the funds separate from your long-term savings account. One of the most popular options is a high yield savings account or a money market account. You can earn a little interest on high-yield accounts and typically won’t be penalized if you withdraw funds when you need them. In addition, it is recommended that you keep your emergency funds at a separate bank from your checking and savings accounts so you won’t be tempted to use them for daily expenses.

Have Questions About Financial Planning? Contact Briteside Solutions Today!

Briteside Solutions is open for business during the COVID-19 crisis. Our certified financial educators can design you a personalized plan with practical guidance on budgeting, spending tracking, and establishing an emergency savings fund. Contact us at (888) 851-0646, on our website, or by emailing