It is imperative to set aside cash in a bank account reserved for unexpected situations. This type of cash savings is commonly called an emergency fund. Although it may initially seem counterintuitive to amass cash savings, maintaining this reserve helps ensure you stay on track with your life and financial goals.

Have you ever planned the perfect sunny weather vacation, only to face one day (or several) of rain? Regardless of how well planned, many circumstances are beyond control.

Financial plans are no exception. Some events are truly unforeseen, such as losing a job or a sudden medical expense. During these situations, an emergency fund acts as the safety net, positioned to catch you. It serves as a buffer, allowing time to adjust to new circumstances and minimizing disruptions to daily life.

Defining “emergency”

What counts an emergency? Simply put, something you never could have known was coming.

• Car breakdown? Yes.

• Scheduled car maintenance? No.

• Garbage disposal breaks on Thanksgiving (true story)? Yes.

• Weekend getaway the weekend after Thanksgiving? No.

• Roof repair? Maybe… is it sudden after a storm? Yes. Have you been due for repairs for the past 2 years? No.

For a true test, engage in honest self-reflection of when you became aware of the expense.

Weeks ago? Then the cost should be funded from regular cash flow or planning and saving.

At the time of the event? Use emergency funds. Also, be thankful you had money available so you will not have to cut back or stop saving for other goals.

The “right” number

Most people answer three to six months of expenses, but unfortunately that is not a fixed rule. The amount to save varies based on a variety of factors, including considerations such dual or single income household, number of dependents, home ownership and personal comfort levels.

Regardless, there is a number that is never appropriate for an emergency fund – zero.