Emergency Fund vs Savings: Navigating the Key Differences

In a world full of uncertainties, it’s important to save for the future and prepare for emergencies. If one of your goals this year is to build a safety net for your finances, an emergency fund and/or a savings account can get you there. We’ll discuss the differences between an emergency fund vs. savings account to help you build a solid financial foundation.

What is the Purpose of an Emergency Fund?

An emergency fund is money that is used for unexpected expenses. This could be a medical emergency, car or home repair or a loss of job. Financial experts recommend having 3-6 months’ worth of living expenses in your emergency fund. You can begin by saving at least 20 percent of your monthly income. This way you’ll have enough money available to cover emergencies if they arise.

Read The Importance of Building an Emergency Fund blog article for more information about emergency funds.

What is the Purpose of a Savings Account?

A savings account earns interest and is used to save for your short and long-term goals such as buying a house or a car, starting a business, saving for your retirement or a child’s future education. In general, a savings account can be for anything that you need to fund to reach your financial goals.

Check out the Four Benefits of a Savings Account in Clark County Credit Union’s blog.

Summary

While both savings and emergency funds are important, they serve different purposes. A savings account is for your planned expenses and financial goals, while an emergency fund is for unexpected events. Having both can help you avoid debt and achieve financial stability with peace of mind. 

At CCCU, we offer a variety of saving options to meet your needs. For questions, call us at 702-228-2228 or visit our Savings Account webpage to compare different savings accounts and current rates.