Your emergency savings should start at $500. Here's how to make that work for your goals

  • How much to save will vary, depending on your income and cost of living.
  • An emergency fund should be invested in cash or cash equivalents that won’t be exposed to risk.
  • Jeremy Straub, CEO of Coastal Wealth, suggests putting away at least 5 percent to 10 percent of each paycheck until you've saved up three to six months' worth of expenses.

There is a certain peace of mind knowing you have money set aside for unforeseen expenses such as a car accident or job loss.

Of course, saying it is a lot easier than doing it. In fact, a recent survey from Bank of America's Winter 2018 Better Money Habits Millennial Report found that 64 percent of millennials say having an emergency savings accounts is a top priority.

How much to save will depend on your income and cost of living, yet experts say your emergency account should start at about $500, according to Americasaves.org.

"It is important to define what would be considered an emergency. For some, it could be a $400 car repair bill, for others it could be losing their job," Rich Ramassini, a certified financial planner and director of strategy and sales performance at PNC Investments, said in an email.

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"I think the recent 35-day government shutdown highlighted how many Americans are working paycheck to paycheck."

Determining the appropriate amount to budget for an emergency account will vary — it would be different for a lawyer or a single mom or recent college graduate. Jeremy Straub, CEO of Coastal Wealth, suggests putting away at least 5 percent to 10 percent of each paycheck until saving up three to six months' worth of expenses.

Depending on the size of your emergency fund, Straub suggests dividing the fund in three buckets. Put one to two months' worth of expenses in checking, two to six months' in a savings account, and six to 12 months' in rolling CDs, depending on the interest rate.

"With the current low-rate environment, we find people typically just keep their emergency fund in savings or a money market account," Straub said.

"The ability to consistently save and invest over time without interruptions increase the probability that important financial goals will be achieved." -Rich Ramassini, director of strategy and sales performance at PNC Investments

An emergency fund should be invested in cash or cash equivalents that won't be exposed to risk, Ramassini said. It's important to make sure the principal is protected so the money is accessible as soon as you need it.

"The easiest way to fund an emergency fund is to do it automatically," he added. "Saving a certain amount each month until you reach your predetermined amount is recommended.

"Automating the process allows you to make the decision once and prioritize," Ramassini continued. "It is harder to stick with the habit if you do it manually and force yourself to make the decision each month. A disciplined system typically yields better results than discipline alone."

Where to save up

Narrowing down the best bank and account to hold your emergency fund requires some consideration. Online banks without brick-and-mortar storefronts tend to have the highest interest rates, paired with good technology, said Straub. "But the key is to get saving, and not over analyze this," he said. "Any bank will work to start saving."

While it's important not to stress over your emergency fund, don't lose sight of your savings goals. When you reach a comfortable number in an emergency fund, you can redirect automated savings toward other financial milestones such as retirement, paying off debt or funding a 529 plan for college, Ramassini said.

"One of the benefits of having an emergency fund is the flexibility it gives you to pursue other goals," he said. "Many an investor is knocked off track by an unexpected expense that requires them to borrow money or forgo funding another goal to pay for the emergency.

"The ability to consistently save and invest over time without interruptions increase the probability that important financial goals will be achieved."

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.