An emergency fund is a necessary ingredient to a sound financial plan. The possibility of illness and layoffs are a part of life, and you may need emergency funds to survive through these tough times.

People need an emergency fund, to pay off debts, while unable to work People are downsized on a regular basis. It may due to improvements in technology, which has made your position obsolete, or the company decides to make cutbacks, to keep their shareholders happy. Regardless of the reason, if you lose your job and have no nest egg, you may soon see some challenging days ahead of you. It may take 3 - 6 months to find a new job. If you in a highly specialized field, you may even have to take a pay cut. It is important to set aside money in a saving account, so that you break the glass in case of emergency.

A disability can have devastating, financial consequences. The doctor bills, the lost of income, can all become a burden in a hurry. Depending on your disability policy, it may be 3 - 6 months before your benefits kick in. Also, review what level of benefits you have under your disability insurance policy. Now, some financial planners will agree that having 3 months of saved income, may be sufficient to weather the financial storm, however 6 months seems more realistic. Keep in mind that doctor bills can be very expensive if you require hospital treatment and rehabilitation.

Having an emergency fund can alleviate some of worries that accompany though times including layoffs or illness. Try to have at 6 months of saved income, to make sure if you are out of work for an extended of time, that your bills can be paid.

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