3 Expenses You May Be Forgetting to Factor Into Your Emergency Fund

Recent data from the Federal Reserve found that only 68% of U.S. adults feel equipped to cover an unplanned $500 expense. And unfortunately, that means that almost one-third of adults clearly don't have a solid emergency fund.

It's important to have money in a savings account to cover unplanned expenses, like home and car repairs. And it's also essential to have money in the bank in case you lose your job and the paycheck that goes with it.

In fact, for the latter reason, the general convention when building your emergency fund is to sock away enough money to cover three to six months of essential living expenses. That way, you'll have money to tide yourself over while looking for work. And it could, depending on what you do, take a good three to six months to get hired after losing a job, especially if you happen to get laid off during a recession.

Now in the course of calculating your essential monthly bills, you may know to account for expenses like:

• Rent or mortgage payments
• Car payments
• Utility bills
• Food
• Medication and healthcare expenses

These are all things you can't do without. But there are other expenses you may need to factor into your emergency fund. Here are three you don't want to forget about.

1. Annual insurance premiums

If you pay for auto, homeowners, or life insurance, you might pay your premiums once a year. Insurance companies often let you spread your payments out and pay them monthly, but there can be a modest discount for paying once a year in full.

But if you're not paying those premiums every single month, you might forget to account for them when running the numbers on your emergency fund. So think about the insurance premiums you pay once a year and make sure your emergency fund can cover them. If, for example, you don't have enough money in savings in the event of a layoff to pay your life insurance premium, you risk having your coverage lapse.

2. Quarterly property taxes

Some people who own a home have their property taxes paid monthly. But usually, that involves an escrow account with your loan servicer where you pay extra each month and it takes care of your property tax bills for you. If you pay those taxes on your own, you might get billed quarterly. But because of that, like insurance where you're not paying monthly, you may forget about those payments and not include them in your emergency fund.

Clearly, that could be a huge mistake. Not paying your property taxes could cost you penalties, and eventually, you could risk losing your home (though this generally will not happen for a period of time). So that's another expense to factor in, for sure.

3. Funds for low-cost entertainment so you can retain your sanity in the event of a layoff

Your emergency fund needs to be able to cover your essential expenses. But let's say you've lost your job and are desperately trying to find another. On those days when you don't have an interview, what are you supposed to do -- sit around the house and stare at the walls? That's hardly good for your mental health.

That's why your emergency fund should include some money for leisure spending. If you're laid off, stuck at home, and bored, it's not unreasonable to want access to some streaming content to take your mind off of things, or to occasionally spend $5 to meet a friend for coffee and get out of the house.

Building an emergency fund is one of the best things you can do for your finances. But don't forget these three expenses when you run your calculations to nail down an emergency savings target.