Building an emergency fund is effectively giving yourself an insurance policy. Best-case scenario, you never need it, and you’ve got some cash set aside. Worst-case scenario, if you lose your job, become ill and can’t work, or if you face unexpected expenses, you’ve got the money there to cover your bills.
The rule of thumb for an emergency fund is to have enough to cover three to six months of expenses. To figure out how much you need, add up all your essential monthly expenses, then multiply that by three to six months. So if your rent, utilities, groceries, insurance and so on totals $2,000 per month, aim for between $6,000 to $12,000 in your emergency fund.
Obviously, this can take a while to build, but that’s okay. Set aside small amounts of money in a high-interest savings account, so if you ever need it, your money is easily accessible.