One of the very first things I learned about when I started to get my financial life together was the importance of an emergency fund. I like to think of it as a security blanket.
An emergency fund is a set amount of money whose purpose is to get you out of unforeseen needs-based emergencies. As with everything personal finance, there continues to be debate as to whether to not to have an emergency fund*, what type of account to have it in and how much it should be.
*Although even GirlMeetsDebt is rethinking the Emergency Fund as of late!
Many great minds also say that this money is there in case an emergency causes you or your partner to lose their job, so this money can also be seen as paying for all your needs in the case of unemployment. To estimate a decent amount, calculate how much it costs to pay all of your needs for one month. It would be excellent to have enough money to get you through at least 2-6 of these bare bones month. I wrote a bit about the how to start your emergency fund here
Yes 2-6 months is a huge range, and therein lies another emergency fund debate.
The bottom line is it is important.
Even if you are putting everything towards getting out of debt.
Even if you have a super big and soon savings goal to get to.
Even if anything!
Start with at least $50-100/month to this fund and see how that feels. At least a $1000 cushion will be a huge piece of mind.
But aside from the lecturing today I’m also showing you how important an emergency fund is!
My partner went out of the country on a planned trip, but had some issues come up with leaving the country. A missed flight and 5 days after the expected return to school and work later, he was now in a place with minimal access to funds, secure internet or a means to buy a decent priced ticket.
So to get him home, I paid for a ticket, which was well over 4 figures. And I did it because I have an emergency fund.
An emergency fund is really important for yourself, but if you are in partnership or even a family, its really amazing to be able to help the people you care about in times of financial stress. Now an emergency fund is certainly not a ‘everyone in the family asks me for money’ fund.
It’s a fund that lets you say, I’m a responsible adult that cares enough about my financial future to plan for unexpected things, and since you are someone I care about and you are going through an unexpected stress, I can be there for you.
This was a pretty powerful experience for me. I’ve never had this feeling before, the ability to know that if people in my life were in a serious bind I could actually be there fore them. Before, when these things arose I certainly always offered to help but it always came with a tightening in my chest of how I was going to get through my month if I helped this person out.
It’s a pretty great feeling to have.