We’ve said it before and we’ll say it again: having an emergency savings stash is critical to your financial well-being.

While there are plenty of ways that you can control your spending and increase your savings, some financial necessities are less predictable. But since happening upon an unforeseen financial woe is almost certain, it’s best to be prepared.

An adequate and intentional emergency fund will keep you in the clear—or at least get you there faster.

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Why Do I Need an Emergency Savings?

The best reason for having an emergency savings? The fact that you’re only human.

Whether due to human error or to another force that’s beyond your control, you’ll want to have enough savings to cover the wide range of incidents or emergencies that could transpire and necessitate a dip into your savings.

Take these scenarios, for example:

Not only would you need to have a healthy amount of savings already set aside to deal with the situation, you’ll also want this savings to be easily accessible in case you need the cash quickly.

Don’t fall prey to the notion that you can avoid the inevitable. Accidents happen, and the damage could be greater if you don’t have the resources to act quickly.

How Do I Start My Emergency Savings Account?

Having an emergency savings is essential, but don’t hasten through the setup of your fund if you’re starting from scratch. How and where you save your money is worth thinking through. Here’s are the questions you should ask yourself to get started:

roll of hundred dollar bills

How Much Emergency Savings Money Do I Need to Set Aside?

The recommended savings for an emergency fund is three to six months worth of wages. There isn’t a magic number that works for everyone, but this estimate assumes, in case of a hardship, an accident, or unexpected unemployment, that this savings would provide you with the time and resources to get back on your feet.

You know your lifestyle and your worries better than anyone, however, including financial experts. Create a savings goal for your emergency fund that you feel comfortable with.

What Kind of Account Should I Use as an Emergency Fund?

In case the name didn’t tip you off: you might need fast access to your fund. Accounts with high interest rates aren’t the best bet for accessibility, so don’t plan on supplementing your savings with much, if any, interest.

At the same time, you’ll want to keep your funds in a separate account where you’re not tempted to spend them. Consider one of these accounts to stow away your savings:

  • Savings or checking account. Whether you create a new savings fund with your existing bank or open a new account with a different bank, having online access can help you keep track of your progress. Checking accounts, and some online savings account, offer small amounts of interest.
  • Money market deposit account. Money market accounts offer better interest rates, so long as you’re able to maintain the high minimum balance that most accounts require. Don’t put all your eggs in this basket, however, as some accounts impose hefty fees for immediately accessing your fund.
  • A combination. Once you’ve saved up a healthy amount, you might consider using a mix of accounts to continue growing your fund. A money market account pairs nicely with a savings or checking account that permits immediate withdrawals. If you’re after higher interest rates, considering splitting your savings into two: one part that earns more interest and one part that stays stable and reachable.

When Should I Start Saving?

Ideally, the answer is “now.” But with bills, debts, and daily expenses fighting for financial attention, it’s important to be realistic with your emergency savings goals.

Arrange your emergency savings in relation to your other financial priorities, like paying off debt.  “Bad debt,” like outstanding credit card debt, should come first. But saving up for your emergency fund and paying off “good debt” can coexist: dedicate a portion of your paycheck to each to consistently build your savings.

Setting up an automatic withdrawal will ensure that you remember to contribute to your emergency savings at regular intervals.

Who Should I Discuss the Emergency Fund With?

If your share your finances with a spouse, consider creating a goal and setting up monthly contributions for your savings account together. You’ll want to be on the same page about how aggressively—and how much in total—you plan to stash away in your emergency savings.

A financial advisor can help you devise strategies for successfully setting aside money for emergencies.

The bottom line? Credit cards are good for some things, but they’re not good for swiping as soon as an emergency arises. Take the time to prepare yourself—as much as you can—for the unknown.

Photo credit (roll of $100's): Flickr