Building a solid financial foundation is key to building a beautiful life as you grow.

The question is, how much is enough of a foundation? Typically you only need to save your "Needs" category of your expenses. Recommendations vary along your stage of life and your risk tolerance. If you're single, in your early twenties, and have no mortgage, you might be able to settle for three months or so of your "Needs" expenses in your emergency fund. You'll probably want more than three months of your "Needs" expenses if you're married and have a 30-year fixed-rate mortgage and grandkids.

An emergency fund is cash you can rely on to get you out of unexpected situations, like getting laid off from a job, car repairs, housing repairs, etc. We calculate it using your basic monthly "Needs" expenses to save enough to keep you going until you can build the fund back up again.

As a 24-year-old, my method blends the three most common recommendations. I take the average of three, four, and six months' expenses in my emergency fund ((3+4+6)/3=4.33). Keeping in mind the general liquidity of my checking account, I add another one and a half of my monthly expenses to my account (1.5).

4.33 Months' Expenses + 1.5 Months' Expenses = 5.83 Months' Expenses is my Emergency Fund Balance.

Every month, my "Needs" expenses and my debt obligations sum to $1,965, so my emergency fund balance should be 5.83 * $1,965 = $11,462.50.

But, if you look at my Budget, you won't see me contributing to my emergency fund. Why not? Why wouldn't I have money in my emergency fund after everything I said? Because I choose to risk it for the biscuit.

I'm coupling my house investment fund and my emergency fund and investing it in the S&P500.

Since my timeframe is more than three years, I'm betting that I will be able to earn more money in the market than I will lose and that I will be net positive on my investments. But, if the market's down like it is now, and I have to use my emergency fund money, I could be out a decent pot of money.

Who's to say which way is better? That's why it's called Personal Finance.

It can be hard to know how much to contribute each month, but you need to make sure you take advantage of any employer matching before putting the rest into building your emergency fund.

I hope this helps you plan out your financial future. Reach out if there's anything I can do to help!