An emergency savings is exactly what it sounds like. It’s a savings account that you use for emergencies only. Examples include a home repair, car repair, or medical emergency. With access to this money, you don’t have to pull funds from another account — such as your primary checking — to manage an untimely situation. 

Here are five of the most important questions you can answer regarding an emergency savings account. 

1. Do you have an emergency savings account?

This is question number one. If you don’t have an emergency account, you must open one. You can do this at an online or local bank. Either way, opt for a savings account that is convenient for you to transfer money into. 

2. How much money is in your account?

If you have an account, make note of its balance. You can also review past activity to better understand what you’ve done right and wrong. 

It’s okay if you don’t have much, if any money, in your emergency account. At least you have a starting point. 

3. How much money do you want to save?

This varies from one person to the next. For example, some finance professionals believe that six months of monthly expenses is a good goal. So, if your expenses are $5,000/month, you should have a minimum of $30,000 in your emergency savings. 

You don’t have to adhere to this advice. Do what’s comfortable for you. 

4. Where will you find money to grow your account?

It’s one thing to set the goal of opening an emergency savings account, but another thing entirely to find enough money to fund it. 

Can you put money from your paycheck into your account every month? What about tax refunds or bonus checks? 

Remember, a little bit of savings each month will add up to a lot of savings over the long run. 

5. Do you earn interest on your balance?

If you’re not earning interest on your balance, you’re missing out on free money. This may be the case if you have a checking account as opposed to a savings account. 

Tip: if you’re opening a new account, compare interest rates before making a decision. The higher the rate the more money you’ll earn each month.

Summary

These are just some of the many questions to answer regarding emergency savings. Once you do so, you’ll have a clear idea of what to do next. 

Do you have an emergency savings account? What bank do you suggest? Do you have any other tips to share?