An emergency fund is simply another savings goal that is a way to protect against job loss, disability, or simple bad luck. Especially if you have a mortgage or you need to provide for your family, an emergency fund is a critical piece of being financially secure. To create one, just set up an extra savings goal and then funnel money to it in the same way you would your other goals. Eventually, your emergency fund should contain 6-12 months of spending money (which includes everything: your mortgage, payments on loans, food, transportation, taxes, gifts, and anything else you would conceivably spend on). I use a 12-month emergency fund personally. Note: If you don’t have a full 6- to 12-month emergency fund yet, I recommend diverting your “save for retirement” investments from the previous step into your emergency fund. Fill this up first, then apply it to your retirement.