6 Times Suze Orman Really Got It Right About Emergency Funds

Emergency funds are among the most important tools for financial security. Having money set aside for unexpected expenses, such as a medical emergency or a sudden job loss, can help reduce financial stress and give you peace of mind.

Financial expert Suze Orman has long advocated for creating and maintaining emergency funds. 

She offers practical and actionable advice to her audience, whether they're just starting to save or need to fine-tune their approach. Orman's insights provide a roadmap for building wealth over time and achieving greater financial stability.

Here are six standout times Suze Orman really nailed it with her advice on emergency funds.

Suze Orman recommends establishing two emergency funds: one for known expenses and another for unknown expenses.

This strategy ensures that unpredictable expenses don't deplete funds meant for critical, larger emergencies and can also help you avoid credit card debt.

 Separating these reserves creates a buffer for unforeseen challenges without jeopardizing your ability to handle everyday financial obligations.

Orman's widely cited advice on emergency funds is to save enough to cover eight to 12 months of living expenses. The exact amount should be based on household size, monthly obligations, and job stability.

For example, someone with an unpredictable income might aim for the higher end of this range. This safety net ensures you're financially covered during a prolonged emergency, such as a layoff or significant medical issue, reducing overall financial stress.

One of Orman's most practical pieces of advice is to automate your savings contributions. Setting up automatic transfers to your emergency fund ensures that you consistently save without the temptation to spend that money elsewhere.

This approach creates a "set-it-and-forget-it" system, making it easier to build your fund over time. Orman's strategy is particularly useful for individuals who struggle to prioritize savings in the face of everyday spending needs.

Orman suggests placing your emergency fund in a high-yield savings account to make your emergency fund work harder for you. These accounts allow you to earn more interest than a standard savings account while keeping your funds easily accessible when needed.

For instance, an account earning a 4% APY could add extra growth to your savings without requiring additional effort. This is a simple way to grow your money while maintaining liquidity.

Life changes, and so should your emergency fund. Orman advises periodically reassessing it — at least once a year or whenever your financial situation changes. 

Did your expenses increase? Did you add new monthly obligations? Revisiting your fund ensures it remains adequate to cover your needs.

While building an emergency fund is crucial, Orman warns against letting it grow excessively large. Money sitting in an account that isn't earning much interest could be better invested elsewhere, such as in a 401(k), IRA, or other tax-advantaged account.

Once your emergency fund reaches its ideal size, consider redirecting extra savings into retirement accounts, paying down debt, or other financial goals that help you build wealth over time.

Suze Orman's emergency fund advice is as relevant today as ever. By focusing on strategies like creating multiple funds, automating contributions, and choosing the right account, you can set yourself up for long-term financial stability.

Building an emergency fund doesn't happen overnight, but small, consistent efforts can make a big difference. 

Are you ready to take Suze Orman's advice, start crafting your safety net, and lower your financial stress? It might be the best money move you make all year.