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How to build back your emergency fund in a tight budget
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Emergency funds are important should you be faced with an unforeseen setback like a sudden job loss, an unexpected car repair or a serious medical situation.
If you tapped into or depleted your emergency savings during the pandemic, it’s vital to set a financial goal to rebuild an emergency fund. Experts suggest having enough money for six months of living expenses in an emergency fund.
Even if your budget is tight, there are ways to stash some cash each month toward emergency savings.
"It may seem difficult to set aside savings when you are on a tight budget, but you have to think about it as having no other choice," said Dawit Kebede, a senior economist for the Credit Union National Association, which advocates on behalf of America’s credit unions.
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Why is an emergency fund so important to have?
Your emergency fund allows you to pay for unexpected expenses, like providing a cushion if you lose your job or face sudden financial obligations. If you don’t have savings, you may have to rely on credit cards.
"Most people rely on high-interest rate credit cards to pay for unforeseen expenses, which leaves them in debt," said Kebede. "Creating an emergency fund avoids relying on debt to absorb a financial shock."