BOSTON (CBS) – Almost 50% of Massachusetts residents have an emergency fund that will last them 3 months according to a study done by FINRA’s Investor Education Foundation.

We currently rank number 5 in the nation, so if this was a contest we rock. This is definitely good, but everyone needs an emergency fund.

An emergency fund is just that – money to be used for emergencies. When income stops coming in or drops, you will need this money to keep paying your mortgage and buy groceries. It’s not mad money, a vacation fund or a Christmas club. It’s your family’s first line of defense when something major goes wrong.

This is money to be used when you lose your job, the winds of a hurricane blows the roof off your house, or your union calls a strike. You need to plan for the unexpected and having an emergency fund allows you to do just that.

The experts agree that everyone needs an emergency fund, but they often disagree on how much you need in it. The conventional wisdom is to have at least three months’ worth of living expenses set aside, and if you can do it, six months’ worth stashed away is even better.

Three months of living expenses is not the same as three months of income. You need only cover the basics here. Take a look at your budget. (You do have a budget don’t you?) What will it take to maintain your lifestyle, rent/mortgage payment, groceries, monthly utilities, childcare, insurance payments, and so on? That’s the amount you’ll need.

If you are single or the sole breadwinner in a family, an emergency fund is extremely important because you don’t have the luxury of a second income to cushion some of the emergency. My recommendations are as follows:

  • Bare minimum for anyone:                  3 months
  • Children & 2 steady incomes:             3-6 months
  • Children & 1 steady income:              4-6 months
  • Children & no steady income:            6-9 months

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