Why you need $500 in the bank

But is it an emergency?

If you've been living paycheck to paycheck for a while, you may be unclear about what constitutes a true emergency. Essentially, it's an event that puts your livelihood or your family's safety at risk.

The television dying, for example, is not an emergency. The furnace dying is.

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A car repair may or may not be an emergency, depending on whether you have alternate transportation. If you can't get to work any other way, then getting the car fixed justifies raiding your emergency fund. If you can take the bus for a while, it doesn't.

Regular, predictable expenses are not emergencies. Neither are gift-giving occasions like weddings, holidays and birthdays.

Having trouble finding the money? Or do you have tips to offer others about how to build a cushion? Share your thoughts on the Your Money message board.

Liz Pulliam Weston's new book, "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life," is now available. Columns by Weston, the Web's most-read personal-finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Published Feb. 12, 2007

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