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When life is going well, you might not think about the need to build an emergency fund. After all, what's the urgency when your loved ones are healthy, work is rewarding, and your home life is humming along just fine? But suppose a tree falls on your car during a snowstorm or a loved one needs long-term rehabilitation. Would you have the funds to cover those costs? The Federal Reserve recently found that 40 percent of Americans wouldn't have the cash to cover a $400 emergency expense.

A crisis can change your financial situation without warning, but an emergency fund can help you weather life's curveballs — without going into debt. Here are examples of when having an emergency fund could come in handy.

Prepare for Health or Home Emergencies

If you or a loved one has an accident and needs medical care that isn't covered by health insurance, or if your insurance has a high deductible, an emergency fund can help to cover healthcare costs and keep your debt at bay. If you need to take a leave of absence from work due to a health emergency, you may need an even larger amount of savings to keep you financially stable until you can return to work.

As for your home, if an unexpected emergency occurs — whether your basement floods and you need to install a sump pump to remove water, or your HVAC system breaks down in the middle of an Albany winter — it could cost you thousands of dollars. Keep in mind that most basic home insurance plans don't cover flood damage.

Handle an Unexpected Job Loss

You might also find yourself in need of an emergency fund if you or your partner experience job loss. Layoffs can happen to anyone. An emergency fund is especially important to have if you work in a field that has low job security or if you're a freelancer.

If you work in a thriving industry in the Albany area, such as healthcare, or if you work for the state of New York, having enough savings to cover a month of expenses (to supplement unemployment checks) might be all you need.

Bolster Your Emergency Savings Fund

Forbes suggests putting your emergency funds in an online savings account that offers a higher than average interest rate and that doesn't have a monthly fee or a minimum balance requirement. Aim to set aside the equivalent of one month's salary. If you save 5 percent of your income per month, you'd have your month's salary saved in 20 months.

If you can't afford to stock away 5 percent of your monthly income just yet, the old school method of saving loose change in a jar works, too. Once the jar is full, swap the change for cash and deposit it into your emergency savings fund. Hopefully, you'll rarely have to dip into your emergency savings. But when life throws a crisis at you, at least you'll have one less thing to worry about.

This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or is offering any tax, accounting, or legal advice.

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