Do you have an emergency account? A saving account for rainy days - when your car broke down, when you or your loved ones suddenly need medical supports, job loss/retrenchment and other unforeseen life circumstances? If you have one, how long can your survive with your emergency account? Everyone needs an emergency account. But, how much do you need in your emergency account?. If you read financial articles, you will notice that financial experts recommend between 3 months to 6 months expenses in your emergency fund. Some even recommend for a minimum of 12 months expenses to be ready in your emergency fund.
Personally, I believe how much you need in your emergency account depends on several factors. I listed the factors below:
1) Stability of the source of your income - If you are in a stable career, 1-2 months expenses is good enough for your. Else, it will be wise for you to have at least 3-4 months expenses in your emergency fund.
2) Your ability to replace the source of income - If you are in a profession where it's easy for your to find a new job, then 1-2 months expenses is good enough for you to survive. If you find that from your previous experiences, you had difficulties to find a new job, then to be on safe side, it is advisable to have at least 4-6 months expenses in your emergency account.
2) The number of dependents - For single adults, you will be able to adapt yourself when you find that you need to spend less so that the emergency account can last longer. If you have a family and you are the sole breadwinner, make sure your saving will cover at least 4-6 months of your family's needs. Some family members (newborns, young baby, aging parents) will not be able to tolerate their needs according to the $$$ in the emergency fund.
How much you need in your emergency account is a personal decision. If you don't have one, it's never too late for your to work out your plan and start saving for your emergency fund now. If you already have one, make sure you have enough funds based on your own needs. With these, you will be able to sleep better at night :)