It is great that you are interested in strengthening your financial reserves. Yes, an emergency fund is critical. The purpose of an emergency fund is, as the name implies, readily accessible cash for emergencies and large or unexpected expenses such as medical bills, disability, or loss of a job. Emergency fund cash should be placed in a liquid savings account or money market fund. Granted, you will not earn much interest on your emergency fund savings. However, other investments such as tax-deferred 401(k)s and IRAs, or investments held in taxable accounts, can complement cash equivalent assets because they generally provide a higher return over time. Start with payroll deductions into a savings account, if available at work (for example, a credit union), or regular transfers of money from a checking account to savings. Many financial experts recommend establishing a minimum of three to six months of expenses in an emergency fund. If you would like to follow Suze Orman's suggestion for an eight-month emergency fund, just to continue to save more. Do not be overwhelmed by the numbers. Even if it takes a few years, you will be slowly accumulating money that can be used if the unexpected happens. We would like your feedback on this Personal Finance Frequently Asked Question.

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