You Need An Emergency Fund: Why and Where To Get Started

“If you are worried about job security and do not have an adequate emergency fund (ideally eight months’ worth of living expenses stashed away in a federally insured bank or credit union), you need to focus more on saving money than paying down the balance on your credit cards.”

Suze Orman

We always like to think that we are financially invincible. So, we fabricate excuses to pass a workout routine, not show up for work, or, most toxic of all, splurge on material possessions so that you do not feel like a sack of potatoes.

The idea of living frugally is tough to digest, mainly because we live in a time where flex culture is all around us. We have this natural instinct to be accepted by the society in which we live, and so, if money solves that problem, no matter how expensive the price, we are more than willing to pay. Stay in the atmosphere long enough, and you will find it challenging to forgo the pleasures to plan for the unknown. However, sorry to break it to you: regardless of the strength of your excuses for remaining in that comfort bubble, those excuses cannot bail you out of an emergency.

Even if you do not have a job or have been laid off, at least you have an emergency fund to hold on to while you are looking for another job opportunity. If your furry companion suddenly requires medical treatment, you can rest easy knowing that you can tap into your emergency fund to pay for the medical bills. Therefore, having a financial buffer is important, I cannot emphasise that enough.

Excuses #1: “I Do Not Need An Emergency Fund. It Is Absolutely Unnecessary.”

Yeah, you do. You do need an emergency fund.

“An emergency fund turns a crisis into an inconvenience.”

Dave Ramsey

This is not so much of an excuse as a flat out misunderstanding of risk and failure to put together a risk management plan. No matter how much you care for your fancy automobile, it will break down on you one day. If the Covid-19 pandemic has proven one thing, employees, including you, can be laid off and replaced at a moment’s notice. Heck, you might break your hand and are handed a hefty medical bill. This is even more crucial for people with children and homeowners; your children might fall ill, or your house may need urgent repairs.

Insurance is one way to shield yourself from these risks. However, remember that it does not cover everything and usually comes with hefty deductibles. The point being made here is that an emergency fund ensures that you are indebted due to an unexpected event.

Excuse #2: “I Am Making Just Enough To Keep Myself Alive. Hence, I Cannot Do It.”


Just because you are making just enough money does not mean that your immunity to financial risks is better than anyone else. If one enormous financial shockwave hits you, you will most likely be unable to shield yourself from it. Hence, an emergency fund might even be more necessary so that if something happens suddenly and you are required to pay a hefty price, your emergency fund can save you.

I am very aware that it is hard to make space in your budget if you feel like there is none. However, saving just a small amount, say $20, on a monthly basis can make a difference down the road. Do all you can to save and live frugally as best you can. You will be glad that you did.

Excuse #3: “I Will Only Build An Emergency Fund When I Have Cleared My Debts.”


“Your emergency fund is not an investment, it’s insurance with one purpose – to protect you and your family.”

Dave Ramsey

When you have interest accruing on loans, it seems foolish to place money anywhere else. However, if the only way out of an emergency is to max out your credit card limit, you are almost guaranteed to pay a higher interest rate on it.

Not only that, if you delay your habit of saving until you no longer have any debts to deal with, how long will it be until you have an emergency fund? I know a couple of people who have graduated many years ago and are still paying their student debts. By the time they have completely repaid their student loans, there will be in their thirties or even forties. That is way too long to wait.

How about this? While you are clearing your debts, capitalise on interest-free credit cards or refinance your loans. If your rates are lower on your debt, you can take comfort in putting some of your money in an emergency fund.

“Okay, Fine. I Hear You, But How Do I Start?”

Step one, establish a goal that suits you. Whether it is $50 monthly or $10 weekly, decide on a realistic amount and commit to it. Step two, separate that money from your checking account. You can put that saved amount into a savings account to earn some interest and still access it on a need-to basis.

How big should your emergency fund be? I typically have an emergency fund that can serve me comfortably for a year. However, that is my preference. The size of the emergency fund that is ideal for you hangs on your personal needs and ability to save. One general guideline that you can follow is to have sufficient money to cover at least six months of your living expenses.

If that is too much for you at this point in time, then make it a priority to save as much as you can. The larger the emergency fund, the more options you have when an unfortunate event strikes.

Final 2¢: Start Building An Emergency Fund Now

When our friends share the high points of their lives, it can be challenging to not succumb to the temptation of jumping on board. I am not saying that you should deprive yourself of life’s greatest moments for the sake of setting up an emergency fund. However, you should always have your priorities set straight where financial decisions are concerned.

Putting together a robust financial portfolio in your head today will save your ass in the future.

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