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Emergencies, by their nature, are unpredictable. When they happen, they can derail your financial stability. A sudden illness or accident, unexpected job loss, or even a surprise home or car repair can devastate your family’s day-to-day cash flow if you aren’t prepared.
While emergencies can’t always be avoided, having emergency savings can take some of the financial sting out of dealing with these unexpected events.
An emergency fund is a separate savings or bank account used to cover or offset the expense of an unforeseen situation. It shouldn’t be considered a nest egg or calculated as part of a long-term savings plan for college tuition, a new car, or a vacation. Instead, this fund serves as a safety net, only to be tapped when an emergency occurs.
While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months’ worth of expenses. This amount can seem daunting at first, but the idea is to put a small amount away each week or two to build up to that goal. You may also want to consider adjusting the amount based on your bill obligations, family needs, job stability, or other factors.
Emergency savings are best placed in an interest-bearing bank account, such as a money market or interest-bearing savings account, that can be accessed easily without taxes or penalties. The concern with placing your emergency savings in mutual funds, stocks or other assets is that they may lose value if the funds need to be accessed quickly.
The goal is to tap your emergency savings only for expenses directly related to an unexpected emergency. By setting a specific dollar amount that should be in that account, you will know how much to build up to. When you draw from the emergency savings, you’ll then know how much to contribute in order to replenish the account. When you do have to take money from this fund, it’s important to immediately start rebuilding it. Remember: If you start saving now, the money you save today can go a long way towards meeting your needs when the next emergency occurs.
Generally, CDs require a minimum purchase amount and may not be withdrawn prior to maturity. CDs are FDIC insured up to $250,000 per depositor per insured depository institution for each account ownership category. CDs may be issued by out of state institutions.
Withdrawals from retirement accounts may be subject to ordinary income tax and may be subject to an IRA 10% additional tax for early or pre-59 1/2 distributions.
Investment products and services are offered through Wells Fargo Advisors. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC (WFCS) and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.
Wells Fargo Bank, N.A. (“the Bank”) offers various banking, advisory, fiduciary and custody products and services, including discretionary portfolio management. Wells Fargo affiliates, including Financial Advisors of Wells Fargo Advisors, may be paid an ongoing or one-time referral fee in relation to clients referred to the Bank. In these instances, the Bank is responsible for the day-to-day management of any referred accounts.
Deposit products offered by Wells Fargo Bank, N.A. Member FDIC.
QSR-06032026-7404287.1.1
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