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I recently enjoyed Twenties Hacker’s letter to twenty-something about emergency funds:
Dear 20-somethings,Life is unexpected. Things happen every day that we don’t expect to happen. A car accident on our route to work making us late for the day. A family member passing away. A car breaking down and needing a fix-up. Situations like this can be very stressful, especially when money is involved. We all know stress isn’t good for us, yet we continually feel this way. One of the biggest causes of stress in life is money. But why should it be?
An emergency fund is simply a pool of money saved away usually in a savings account that can be easily accessed in case of an unexpected situation that requires it. The main reason that everyone should have one is in case of job loss, and with this recession still going on, you never know if your job is actually guaranteed.
However, an emergency fund can be used for many other things as well. It would be kind of silly to leave money in a savings account specifically for job loss, and then it never happens. I am personally slowly building mine up, and I’ve already had to dig into it once to replace my entire windshield after a massive crack went down the middle of it.
Always be prepared: How much water do I need to keep on hand in case of emergency?
If disaster strikes tonight, if Godzilla comes down your street, crushing the pavement, ripping up water lines and making travel difficult, will you be prepared?... Read more
Our emergency fund is one of the things I’m proudest of. I’m in charge of our household’s money, and I divert as much of it as possible into our savings.
Our fund isn’t as big as I’d like it to be right now, and sometimes it’s hard to put the money into savings rather than spending it on fun stuff. But our fund has, on SEVERAL occasions, saved my partner and I from giving up on our projects to work a McJob to pay for our lives. Our emergency fund — and forgoing some immediate, small fun in favor of planning for the future — has enabled us to keep control of our lives.
It’s saved our butts when somebody stole part of our car. And when I lost my job. And when Scott lost his job. And it’ll save our asses again!
If you’re considering starting an emergency fund, Twenties Hacker has a rundown of the who what where when and why. My number one tip is this: automate your savings. Make saving money mindless and automatic and something you have to lift a finger to stop. We started our emergency fund with SmartyPig, but now we bank with a credit union which allows me to set up and manage automatic withdrawals. Currently $50 a week goes into savings. Every week. No matter what.
So I’m wondering about you! Do you have an emergency fund? If so, is it fully-funded (good for six months of bare-bones living)?
Thanks for writing this! I have always been the saver whilst my husband likes to splurge. We are moving house this weekend and I have been freaking out about having to use our beloved savings account to pay for the deposit, fees, removal costs, and all the other stuff!
But actually, all these comments have reminded me that moving is a valid reason to use the fund, and we just have to work hard to build it up again!
We’ve put away 10% of our income for the past 11 years. Occasionally we’ve had to dip into it to save us from life’s surprises. We found the percentage system kept us always in a comfortable zone regardless of what our income was.
So true! Wish I’d had one when my car got totaled nine months ago. And it would have saved me in two months of car-less unemployment. Now, it’s the money if I have to fix something, if I have to visit my family 1500 miles away, if I have to get those wisdom teeth taken out sooner than I’d expected. As a recent grad, I have a ton of debt, but getting rid of the credit cards has let me focus more on the car and student loans and actually build an emergency fund.
I am lucky enough to have not touched my emergency fund for anything since I hit the total I was saving for. Probably the best thing that has come out of working on creating that pile of emergency cash has been the fact that it taught me some discipline with my money.
I’m not contributing to the emergency fund anymore – but I am saving up for retirement, plane tickets to see family, future school fees, and money for the summer when I won’t have any grad assistant money coming in. It taught me to prioritize the things that are important and keep in mind that that baller dress I see at the store is not as good as having the money to see family for Christmas.