Before thinking about stocks, real estate funds or any more aggressive investment, there is one step that is usually recommended as a priority: building an emergency fund.
What it’s for
An emergency fund is money set aside for the unexpected — loss of income, unforeseen medical expenses, urgent repairs — without having to turn to expensive debt, such as an overdraft or revolving credit card balances.
How much to save
There is no single rule, but a common recommendation is to save between 3 and 12 months of essential expenses, depending on how stable your income is. People with more variable income or who are self-employed usually need a proportionally larger fund.
Where to keep this money
- It needs high liquidity: withdrawals should be quick, ideally same-day.
- It needs low risk: this is not money to put at risk in pursuit of higher returns.
- Common options: Tesouro Selic (a Brazilian government bond tied to the benchmark rate), daily-liquidity CDBs (bank certificates of deposit) with good returns, and DI funds (funds tracking the interbank rate) with low management fees.
Your emergency fund shouldn’t compete with your other financial goals — it exists to protect the rest of your plan when the unexpected happens.
How to get started when the target feels far away
Setting a fixed monthly amount to save, even a small one, and automating that transfer right after you get paid usually works better than waiting for money to be “left over” at the end of the month.