Like most forms of ‘insurance’ the hope is that it’s never needed. Life dishes out some unexpected surprises and having a contingency fund provides piece of mind. How to build one? With so many demands on the paycheck it is hard to set aside funds when ‘just in case’ seems unlikely and far away.

The consensus is that the equivalent of 6 months salary is the size of fund to set up. Even though you may have access to employment benefits, monthly expenses continue relentlessly and replacing your regular monthly income may take longer than 6 months. Don’t forget to consider other factors unique to your situation in calculating the size of emergency fund you need. If your work is highly specialized and/or you are the primary breadwinner in your family, you may feel better knowing you’ve got enough saved to last you longer than 6 months. This guideline assumes that your household expenses will be covered with this income level.

How to accumulate a sizable amount of money? You can set up a monthly savings plan. A good way to reach your target is to divert any chunks of money you receive that are not part of your regular paycheck. Tax returns, bonuses, gifts or raises. It’s amazing how quickly these amounts add up. Direct them straight to your savings!