No one can predict the future, but it’s a pretty safe bet that everyone will run into unforeseen expenses. If an expense is large enough, it can put an unprepared person into the position of having to borrow money or withdraw investments to cover costs.
Emergency savings accounts are an incredibly helpful precaution to guard against uncertainty. Using extra money from paychecks, you should make regular deposits until you have built up a sum large enough to cover your expenses through a prolonged emergency, such as major medical bills, car repairs or the loss of a job. Most experts recommend saving enough to cover at least three months’ worth of bills and living expenses.
An emergency savings account has the added benefit of generating interest—even if you stop making contributions, money will still be added. With a fully funded account, you can handle unexpected expenses worry-free.