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    The shutdown’s lesson: You need an emergency fund

    A man protested the government shutdown in front of the US Capitol.
    JEWEL SAMAD/AFP/Getty Images
    A man protested the government shutdown in front of the US Capitol.

    Let the government shutdown serve as a wake-up call: You need an emergency fund.

    Thousands of government workers were out of work for more than two weeks, causing many of them to fall behind on bills. Although they will receive back pay, the event highlights how quickly, and unexpectedly, financial situations can change. The shutdown also showed no jobs are safe.

    Most financial advisers say you should be prepared to go without a paycheck for several months. Here’s what you need to know about building that safety fund:


     Figure out expenses. Start by adding up your bills for necessities, such as rent, health insurance, groceries, and utilities, says Mackey McNeill, a certified public accountant and president of Mackey Advisors in Bellevue, Ky. It wouldn’t hurt to add in discretionary spending, too, like going out to the movies. ‘‘Should you cut out Starbucks? Probably,’’ McNeill says.

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     Determine how much you need. You need to save up enough to cover at least three months’ expenses, says Anna Behnam, a financial adviser at Ameriprise in Rockville, Md. But if you’re nervous about your job, save more. Think at least six months, especially if you’ve been laid off or furloughed before. ‘‘There’s a chance it might happen again,’’ Behnam says.

    If you’ve never saved for an emergency fund before, start small. ‘‘Try saving $100 a month,’’ McNeill says. ‘‘Don’t overreach.’’ Putting away more than you can afford can lead to failure, and you may just quit. And don’t ever take the money out.

     Make sure it’s accessible. Keep your emergency fund in a bank account that’s easily accessible. You always want to keep the fund out of stocks and in cash. ‘‘It should be in the most boring account you can find,’’ McNeill says. That means a savings accounts, even though most banks offer interest rates that are close to zero.

    If interest rates on your bank’s certificates of deposit are more attractive, Behnam recommends leaving one month’s worth of expenses in a savings account and the rest in a no-penalty CD. That means that you can withdraw money from it at any time, without paying a fee.


    The account should be separate from your checking account and accounts for saving to purchase a home or vacation. If you decide to go with an online savings account, make sure it is linked to your primary checking account to ease transfers.

     Ask for help. If you lose your job or find yourself furloughed and don’t have enough money, call the companies you owe money to. ‘‘Most creditors want to hear from you if you’re not paying bills on time,’’ says Hugh Anderson, a Las Vegas managing director at HighTower. Call landlords, mortgage providers, credit card and student loan companies, and anyone you may owe money to.