How Much to Keep in Your Home Emergency Fund?
As a homeowner, it’s important to have an emergency fund in case unexpected circumstances arise.
If you lose your job, have a medical emergency, or need to make any major home repairs, an emergency fund could save you from a financial crisis.
But it can be difficult to know how much money should be in your emergency fund. While the answer varies on a case by case basis, there are a couple of tips you can use to make sure you have enough money saved up in case of emergency.
Let’s take a look at how much you should save in your emergency fund as a homeowner.
Why You Need an Emergency Fund
Why is building an emergency fund important?
Having an adequate emergency fund in place is very important for a number of reasons. Primarily, it will help you maintain your financial wellbeing when emergencies arise.
Prepare for Emergencies
Life is full of surprises, and not all of them are good. Whether you are laid off, fired, have a medical emergency, get into an accident, or any run into any other unfortunate circumstances, it’s important to have a safety net to avoid going into debt.
Without having an emergency savings account, these disasters could deplete your savings, send you into extreme debt, and even lead to bankruptcy.
Additionally, as a homeowner, an emergency fund will help you take care of important home maintenance and repairs. Home maintenance is inevitable. As such, it’s important to have the funds available to take care of your home so that small issues don’t become major problems.
Additionally, an emergency fund can help you make repairs and renovations before selling your home. This can help you increase your home’s value and sell it as quickly as possible.
How Much to Save in Your Emergency Fund
So, how much should be in your emergency fund?
Unfortunately, there isn’t a definitive answer. Ultimately, the most important thing is to save as much as possible. The more the better.
Generally, you should aim to save at least three to six months worth of living expenses. This will ensure that you are able to make your mortgage payments and support yourself for a while in case there is a major hit to your finances.
Furthermore, as a homeowner, it’s important to consider how much money you need to save for maintenance and repairs. Some people suggest that your home emergency fund should around 1% to 3% of your home’s value.
For example, if your home is worth $250,000, you should try to save between $2,500 and $7,500 for emergency repairs. While saving more is always a good idea when possible, this should be enough to protect you in case you need to make any emergency home repairs.
As a homeowner, it’s important to build an emergency fund so that you are prepared for any circumstances. Without an emergency fund, your financial wellbeing could be ruined if you run into any emergencies.
While there is no ‘right’ amount, every homeowner should aim to save at least a few months worth of living expenses, just in case.