Imagine yourself facing a job loss, a severe illness or injury, major car or home repairs, or some other unexpected big drain on your finances. How financially prepared are you for that kind of situation? Would you have enough cash available to get through it without having to face the risk of long-term financial troubles?

Most Americans don't have enough savings to cover a $1,000 emergency, according to a recent survey by Bankrate.com. Many people turn to credit cards or loans to make up for the lack of available cash. But when you're already struggling financially, taking on new debt might only make matters worse.

An emergency savings fund offers critical protection against the potentially serious and lasting repercussions of a financial emergency. If you don't already have such a "rainy-day" fund, building one should be at or near the top of your financial priorities.

How much savings do you need?

Generally, it's good to have enough cash in your emergency fund to cover at least three to six months of basic living expenses, including:

• Mortgage or rent payments
• Groceries
• Utilities
• Transportation
• Insurance premiums
• Fixed loan payments
• Minimum credit card payments

There are certain expenses that you can generally suspend in an emergency — think restaurant meal delivery; a cable, satellite or fiber TV subscription; and saving for college and retirement. These aren't typically considered basic living expenses.

Although three to six months of basic living expenses is a good savings goal to aim for, every little bit helps. Even having a few hundred dollars tucked away can offer some protection and peace of mind, so save what you can. If money's tight now, maybe you'll be able to save more later. Say you put $40 a month into an account earning 1% interest. A year later, assuming you don't withdraw any cash, you'll have $483, which might cover car repairs, as one example.

Where should you keep your fund?

Keep your emergency savings separate from your checking account. Choose a secure account that offers quick and easy access to your money while providing some level of investment interest. That typically means a money market account at a bank or credit union, a money market fund or a high-yield online savings account.

Emergency fund tips

• A household budget can help you find ways to cut costs, reduce debt and increase savings. You can include ongoing contributions to savings as a budget item.
• Pay yourself first. Consider setting up automatic monthly transfers from your checking account to your emergency fund. Or ask your employer whether you can authorize direct deposit from your paycheck.
• If you get a pay raise, increase your contributions to savings.
• Whenever you receive extra income, like a tax refund or bonus, add it to your fund.
• Resist tapping your fund for "wants," like a new TV or patio furniture.
• Whenever you draw from the fund, try to restore it to goal size as soon as possible.
• Revisit your fund at least once a year or whenever you have a major life change, like adding a child to your family or having one leave the nest. You'll want to account for any increase or decrease in your basic living expenses and in the amount of savings you need.

Get more guidance

"Plan for the unexpected" is one of the financial goals you can pursue using the EY Navigate™ website or mobile app. To get a personalized estimate of the amount of emergency savings you need, use the Emergency Savings Calculator on either the website or the app.

This material is provided solely for educational purposes; it does not take into account any specific individual facts and circumstances. It is not intended, and should not be relied upon, as tax, accounting, or legal advice.