5 Reasons you Need an Emergency Fund

Let’s face it.  Saving isn’t one of the most exciting things to do.  After working hard, most of us would rather take a vacation or buy a shiny new gadget right?  Although saving may not be fun, it is well worth it to save financial stress down the line.  This is where an emergency fund comes in!

5 Reasons you Need an Emergency Fund

An emergency fund is 3-6 months net income set aside in the event of job loss, car problems, a medical emergency, or other unexpected financial situations.  The amount you should save is a range because what you need is based upon your situation.  If you work in an industry where there are limited opportunities or freelance, it would be worth saving closer to 6 months.

During the 2008/2009 financial crisis time period, the unemployment rate was so high that my favorite financial guru, Suzie Orman, suggested saving 9 months net income!

 

5 Situations where an emergency fund would come in handy are:

  1. Unexpected Job Loss
  2. Job Offer in Another City
  3. Car Trouble
  4. Death in the Family
  5. Unforeseen Medical expenses

 

In order to truly save your emergency fund for priority situations, set up a separate savings account that you do not have regular access too.  That way when you hear about a deal or think you “need” something, the funds are not easily accessible.  Yes, leave your emergency fund alone even if you find an awesome flight deal.

If you don’t have anything saved toward an emergency fund yet, it is not too late to get started!  Slow and steady wins the race to financial freedom. One of my favorite ways to save is during tax time.  If you are fortunate to receive a tax refund, you can use part or all of the tax refund to start your emergency fund!

 

Check out these steps to starting an emergency fund so it won’t seem so overwhelming!

 

Personally, my emergency fund has come in handy plenty of times!  For example, that one time I was job-less for 3 months.  I thought it would be impossible to survive but my emergency fund came to the rescue.  I also remember that other time that my car broke down and it was $800 to fix!  Although it is never fun to shelve out your hard earned dough, it is a great feeling to know you don’t have to go in to debt to cover a financial emergency.

5 Reasons you Need an Emergency Fund

When has your emergency fund come in handy?  What difficulties do you have with establishing or maintaining an emergency fund?

 

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14 comments

  1. God, l remember those dark days of 2008 and beyond. I had a good job with good pay, but my tenants put me in the poor house. Some lost their jobs and l had to cover several mortgages which totally put me in the poor house, never mind eviction costs. It’s always important to have backup money, even though mine wasn’t enough, but it helped. In hindsight, l should have done things differently. I loved Suzie, especially at that time :-).

    1. Yes! I first started watching Suzie Orman in 2008-2009! She has a very loving but no nonsense attitude about money. I’ve always wanted to get in to the rental business but I’m afraid of the risk of tenants are unable to pay. It is very clear that a large savings/emergency fund is imperative.

  2. This is something I’m guilty of, I have savings and money available in case of emergency. What I don’t have is a stash that is strictly for said things. I’m going to make that a thing.

  3. This is something that is indeed important but I think people underestimate how difficult it can be for working class people to do this. I began saving 10% of my income when I got my first, *real* job. Then I came out of student loan forbearance and things got real. Reduced spending, cut out extras, no more frivolous purchases, and still it was so hard to save.

    I live and work abroad now, and it’s been the only time in my life that I’ve been able to adequately save money. Prayerfully no curveballs will be thrown my way, and I’ll be able to continue to do so.

    1. I do agree Keisha, fully funding a retirement plan can be difficult. Nice job on saving 10% of your income with your first real job. This is why though it’s so important to live below our means – if possible. To hopefully free up money to save. At one point I worked a second job to expedite paying off debt and save.

  4. 100% TRUTH. I’m guilty of this though =( But reading reminds me of all the reasons why it is imperative it is to have emergency savings funds. Especially yes, times like you mention when the car needs work. OMG. Totally guilty. Thanks for the reminder.

  5. Girl you keep me thinking about my money (and sometimes lack thereof). lol. As always great reminder and great read!

  6. These are great reasons to have an emergency fund! I definitely need to work on making mine more substantial.

  7. You’re right, emergency funds are really important! I agree with all of your reasons. I don’t exactly have much of an emergency fund right now, because I keep tapping into it, but this post has inspired me to do better!

  8. This post was right on time. In the past week, my husband had to get his car towed and fixed ($1200). While in the shop, he used my car which ended up getting a flat tire that couldn’t be salvaged so we ended up just replacing all 4 tires on my truck (another $700). I’m thanking God we were able to take care of these crazy “out of the blue” expenses without financial stress.

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