Reader Q&A: The Emergency Fund

Reader Q&AToday’s question comes from a reader on the West Coast. She’s wondering about having an Emergency Fund – and whether everyone really needs to put aside 3-6 months of expenses. I love this question and, as you will see, had a LOT to say on the subject!

I’m new to your blog… and fortunately not in debt apart from our (rather large) mortgage. My husband and I earn a comfortable income and have very secure jobs. We set aside retirement and some college savings each month (though not enough).

Given all that, do we still need an emergency fund if we really are not in danger of losing our jobs?

In our situation, what is wrong with considering our credit cards to BE our emergency fund?

Congrats on doing so well financially – that is wonderful! Having a secure job, epsecially in this economy, probably feels like such a blessing.

Given that blessing, I would challenge you to really start paying close attention to what you do with your money, so that you can achieve even greater successes financially.

If you and your husband aren’t yet on a written budget, that would be my first suggestion. I know you didn’t ask about this, but I am reading between the lines!

Getting on a budget may lead you to suddenly realize that you have plenty of money to not only fully fund retirement and college, but also to build that emergenecy fund – although not necessarily in that order.

By the way, the reason I have found a written budget to be so helpful is that it prevents all the little money “leaks”. The coffees at Starbucks, the impulse buys at the grocery store, the new pair of shoes you forgot to account for… With a written budget, those leaks have no where to hide, so you can stop them up – and start spending your money more intentionally. (I’m not saying, by the way, ‘Don’t buy shoes’ – I’m saying, ‘Be intentional about buying shoes!’)

As to the Emergency Fund question: In a word, YES. I think everyone should have one.

Before we got our financial lives under control, I really couldn’t imagine having an emergency fund. I couldn’t imagine having enough money left over to save up for one.

I truthfully couldn’t envision what it would be like to have $100 in the bank – let alone $1,000… LET ALONE $10,000 or more.

But having walked through that and come out the other side, let me tell you that building our emergency fund is the most important thing we have done – or will do! – for our finances EVER.

By having that CASH in the BANK, we have security. We have peace of mind.

The amount of the Emergency Fund will vary from family to family. Maybe you don’t need to worry as much as we do (since we’re both self-employed) about job loss or income drops. So, perhaps you don’t “need” 6 months of expenses in your emergency fund.

But job insecurity isn’t the only “emergency” that can befall a family. There are unforseen house repairs, and car repairs, and medical bills, and sick parents, and sick children, and truly a million other things that aren’t budgeted for regularly, but NEED to be dealt with immediately.

When we don’t have an emergency fund – or a rainy day fund, or a life-happens-fund – then how do we pay for that stuff the inevitably comes up?

For most people, the answer is probably: Put it on the credit card.

And you know what happens when we do that? The emergency turns into a crisis. Because now we don’t only have the emotional stuff to deal with, we’ve got the money stuff to deal with too.

We have credit card bills, without the money to cover them – which means interest and late fees… and suddenly that emergency is taking a far greater toll than it needs to.

One of the things I love most about having an Emergency Fund is that it allows me to focus on the issue at hand – and not get all tied up in knots over the money part of it. I am clearer headed with an Emergency Fund. I am able to respond from my loving heart, and not my panicking brain.

Now, I can’t tell you how much money that fund needs to be. Is $10,000 enough? $20,000? $50,000? Is there any amount of money that will insulate us from all of life’s calamities?

Certainly not. But there is an amount – and only you and your husband can determine that – that will give you PEACE of mind, while still allowing you to do other smart things with your money.

In other words, if your ‘peace of mind number’ is $50K (which it doesn’t sound like it is, but just for example sake), but it will take 6 years to save that – during which you won’t be able to do anything else with your money, then that’s probably too much.

But if you can save $20K in a year, then yes, I think it’s worth it to hold off on other financial goals for that year to gain that LIFETIME of peace.

The emotional and financial benefits of an Emergency Fund are innumerable. And, in my opinion, no matter how secure your jobs or high your income, those benefits can never be matched by revolving credit.

Disclaimer: I am not a financial adviser, nor do I play one on this blog. This post should not be construed as legal or financial advise. I am merely relating my opinions about emergency funds based on my own personal experience.

You can see more Reader Q&As here. Do you have a question about budgeting, couponing, menu planning or anything else? Please send me an email – I love hearing from my readers!


  1. I am so glad we have an emergency fund- in five weeks we had to have two full grown maples removed (broken in a windstorm and terrorizing the power lines and our roof), our 23 year old washer AND dryer died and were replaced, the ignitor in our oven needed to be replaced and both of our cars needed several minor maintenance issues dealt with. If we had to put the several thousand dollars on a credit card and pay over time I would be sick but we had the money and we are working on rebuilding our savings.

    • Oh my gosh, you have really been through the ringer! I’m glad you had your EF, too – at least you can fix / replace the broken STUFF and move on from it. I hope the EF gets rebuilt quickly and without having to make too many sacrifices!

      • Yeah, it means that we will be pulling the belt even tighter and having a very light holiday season . As long as we don’t have to replace a car or roof then we will ok especially since the fridge is beginning to act strangely… It turns out that all the appliances that came with the house are all the same age. Yikes.
        At least the girls are young enough not to notice and my stepson is old enough to get it.

  2. While I know that building an emergency fund is so important, I have to admit that it seems almost impossible to me. I can see the comfort and peace of mind in the future, but I can’t grasp the allocation in the present. It just seems like a huge, huge mountain in the middle of a bunch of steep hills that we’re facing right now.

    My new frame of mind: building this fund needs to be part of the written budget just like any other bill or expense. The money needs to be moved automatically from checking to savings. And since the long-term fund goal is such a big, far-away number, maybe we need to come up with small (non-financial!) incentives when we hit predetermined milestones.

    • I totally understand! Completely! As I said, $1000 seemed impossible. But $10K or $20K??? Impossible!

      We did it working the baby steps. Dave Ramsey says to start with $1K as a “baby emergency fund”. Then pay off debt (if you’ve got any).

      We were totally “gazelle” – as Dave says – until we paid off all that debt and built up the EF. Then we took our foot of the gas a bit and let some “life” back in.

      It is very hard at first, but once you get into the groove, you will be shocked at how quickly you are able to pile up that money. I started with the goal of one month – then two – then three – and finally, six.

      • Something else in my mind: I think we have to have this *fully* funded before we can make a down payment on a house — and yes, we are going to work on both of those funds simultaneously.

        • Oh yes! I totally agree! Home ownership is very expensive and opens you up to all sorts of potential ’emergencies’. Quoting Dave again, he says that buying a house when you have your debt paid off AND your emergency fund fully funded makes that house a true blessings. Having bought a house both ways, I can say that I completely agree that the debt-free/fully-funded EF way is the way to go!

  3. I was just inspired to add $5 a week (to each account, 1 EF and two kids savings) to our automatic savings plan!

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