A safety net is separate savings used to cover living expenses in the event of a financial surprise, such as a job loss, medical emergency, unexpected home repairs, or car trouble. It can provide you with peace of mind and is usually the wiser choice over other potentially costly methods of borrowing money, such as relying on your credit cards, taking out a personal loan, or withdrawing money from a retirement account.
Financial experts advise that you should have at least 3 to 6 months of living expenses in your safety net. Where you fall on that spectrum depends on a variety of factors such as your job stability, family size, how many earners are in your household, and how diversified your income is. This tool helps you determine how much should have for your safety net, how much you can save monthly to build it, and how long it will take to reach your goal. By setting automatic transfers from your bank account to your emergency fund or utilizing direct deposit, you won't need to think about making those monthly deposits.
This material is meant to educate and not to provide legal, tax, accounting or investment advice.
PNC Bank, National Association.
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