Lesson 2: Saving & Emergency Funds

Saving & Emergency Funds Reference

Why Save?

• Financial security against unexpected expenses
• Freedom to pursue opportunities (travel, education, business)
• Avoid debt for foreseeable purchases
• Build wealth over time via interest and investment returns

Emergency Fund

An emergency fund is 3-6 months of living expenses kept in an easily accessible account (high-yield savings). Purpose: cover job loss, medical emergencies, car/home repairs without going into debt.

• Start with a $1,000 starter emergency fund
• Build to 3 months minimum, 6 months ideally
• Keep separate from checking account (to avoid spending it)
• Replenish immediately after use

Types of Savings Accounts

• Regular savings: low interest (~0.5%), easy access.
• High-yield savings (HYSA): higher APY (3-5%), still FDIC insured.
• Money market account: slightly higher rate, check-writing ability.
• CD (Certificate of Deposit): fixed rate for locked-in term (penalty for early withdrawal).

Pay Yourself First

Transfer savings automatically on payday before you can spend it. Even $25-50/week adds up. Automate it so it's not optional.