We're Safe from Murphy, Right?

Dear Dave,

My husband is getting ready to retire. With his pension, we'll still have an income of about $52,000 a year. He thinks we don't need an emergency fund because we'll still have good money coming in on a regular basis. I'd feel better if we had one but I'm wondering what you think.

Karen

Dear Karen,

Of course, you need an emergency fund! If you're breathing, you need an emergency fund!

A good pension can feel pretty solid, but there's always the possibility of lost income or other emergencies. What if your car dies, or one of you experiences a major medical event? Life has teeth, and it can bite you at any time. A good, old-fashioned rainy-day fund will keep you from going into debt when the unexpected happens.

I recommend an emergency fund of three to six months of expenses. Put it in a good money market account with check writing privileges and a decent interest rate. That way, your money will work for you. With a solid, steady income you can lean toward the three-month side. Otherwise, I'd save up five or six months of expenses.

A fully funded emergency fund is great Murphy repellant, Karen. It will make you both feel better, plus it can turn a disaster into nothing more than a minor inconvenience!

- Dave

* For more financial help please visit www.daveramsey.com.

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