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The Importance of an Emergency Fund

June 10, 2015 Brian

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It wasn’t until five years ago that I understood the importance of an emergency fund. Before that point I have five other reasons not to be concerned about such a fund. Those five reasons were five different credit cards, all with large credit limits and increasing balances. They were who I called upon when an emergency popped up or actually when ever I felt I wanted or deserved something too. It was so easy to reach into my pocket and swipe the credit card and deal with the consequences later, then deal with them up front. Because the reality of that would have meant I wouldn’t have made the purchase or figured out another way to deal with that emergency situation. It was that small change in my thinking of dealing with things first, and having a plan that gave me a clear understanding of the importance of the emergency fund.

emergency fund

Peace of Mind

I first called an emergency fund a piece of mind fund early this year. Now I’m not sure if that an original thought coined by me or if I read it or heard it somewhere else, but what I do know that once we established a $1k emergency fund back in 2010 things began to change. That $1k insulated us from a lot of life that happened, you know those unexpected things that pop up, the Murphy. I didn’t fear Murphy any longer all because of $1000 sitting in my bank. Because I knew with that cash I could handle any minor unexpected thing that was tossed at me. We had our share. So when the cars broke down, or the dishwasher blew up I turn to the e-fund for help. The funny thing was now that I had ten hundred-dollar bills in the bank. I didn’t want to part with them, so I looked for the cheapest (and safest) way to fix the car. I called my brother and we took the dishwasher apart and ordered the replacement parts to fix it. Prior to having the emergency fund establish I would have just reached into my pocket and grab the credit card to buy a new dishwasher altogether, instead of buying a $50 part to repair the one I had. I owe that shift in thinking and behavior to the fact that once we put the e-fund in place we didn’t want to deplete it.

No Panic

Since we began our financial make over we have had some major events occur in our lives. My wife was in a car accident, injured, was out of work for a year and required surgery. She recovered nicely returned to work, than had emergency gall bladder surgery and was out of work for another ten weeks. My position of over 20 years was eliminated. Through all of these major things we never panicked, why because we had a plan with our money. Sure these events were stressful, concern for my wife’s health was top priority, but we had put ourselves in a position if she never returned to work that we would be okay. A job loss can be crippling to an individual and a family if not prepared. It’s an emotional event, a big change, even a blow to one’s ego. Having not to worry about immediate income through a transition like this makes all the difference. That’s what an emergency fund does for you. I can’t image not having an e-fund now. I certainly wish all of any of the events I described never happened to us, but they did, but lucky the happen over the last five years and when got our act together, because if they happened say 6 or 7 years ago they would have add so much stress and anger to the emotion mix I’m not sure how we would have handle it all.

What’s the biggest emergency your fund has insulated you from? If you don’t have a fund establish yet what is your target savings? And why?

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Filed Under: Family, Personal Finance Tagged With: Emergency Fund, Family, Personal Finance

Comments

  1. Holly@ClubThrifty says

    June 10, 2015 at 8:32 AM

    Our emergency fund definitely gives me peace of mind. It’s the reason I don’t stress when we have a home repair or freak when my work schedule isn’t full.

    • Brian says

      June 10, 2015 at 12:00 PM

      It has that affect!

  2. Luke Fitzgerald @ FinanciallyFitz.com says

    June 10, 2015 at 9:17 AM

    All hail the Emergency Fund! You can’t put a price on peace of mind! The e-fund is insurance for your insurance. One of the better investments you can make is fully funding an emergency fund.

    • Brian says

      June 10, 2015 at 12:02 PM

      Agree with you 100% Luke. If you don’t have one yet you need to get one!

  3. Fervent Finance says

    June 10, 2015 at 10:55 AM

    I’ve never used my emergency fund for an emergency knock on wood. I don’t support anyone but myself, so if sh!t hit the fan, I’d just move home with the rents. Currently my emergency fund is only at about 3-4 months of expenses, but I’m okay with that. I’d rather use the money to pay down debt and invest.

    • Brian says

      June 10, 2015 at 12:03 PM

      3-4 months is good coverage when you old have yourself to worry about.

  4. B Simple says

    June 10, 2015 at 12:17 PM

    An emergency fund is truly a peace of mind fund. My EF has helped out several times unexpected home repairs as well as with a natural disaster. It has prevented adding additional debt to my finances.

    • Brian says

      June 10, 2015 at 5:07 PM

      That’s a key benefit of a EF, not adding any additional debt. Good stuff.

  5. Kirsten says

    June 10, 2015 at 1:40 PM

    We have a pseudo emergency fund, but I generally try to forget about it. Back when my mom died, I got the life insurance payout in a mutual fund. We have used almost all of it – except for 5k. It’s not enough. I would like to see 6 months of our take home pay. And that’s not even close.

    • Brian says

      June 10, 2015 at 5:11 PM

      5K would cover many things and much better than nothing. 🙂

  6. Melanie @ Dear Debt says

    June 10, 2015 at 3:03 PM

    I call my emergency fund my ‘sleep well at night’ fund 🙂

    • Brian says

      June 10, 2015 at 5:19 PM

      I like the sound of that too! 🙂

  7. Amy @ DebtGal says

    June 10, 2015 at 9:50 PM

    We didn’t have an emergency fund until about a year ago. (We used credit cards, too.) I was fortunate to receive some from a family member, which helped us bulk up the fund more quickly than we could’ve on our own. It’s not six months worth of expenses, yet, but it’s getting there.

    I totally know what you mean about not wanting to tap it once it’s saved!

    • Brian says

      June 11, 2015 at 9:27 PM

      Good for you Amy!

  8. DC @ Young Adult Money says

    June 10, 2015 at 11:32 PM

    we had our sewer drain-out have issues soon after we bought our house and there was literally only about an inch and a half opening so it clogged easily. We were told it would cost at least $7k to fix. It was more than our emergency fund but was a good lesson why we needed to have more cash in our savings. Thankfully it all worked out in the end and we went with a more ethical contractor who said he could do it for $2.5k and who consulted with the city on our behalf and actually got the whole thing paid for by the city PLUS all our bills related to it. So happy there are people like that who wouldn’t’ take advantage of a first time homeowner.

    • Brian says

      June 11, 2015 at 9:32 PM

      Good for you DC, that’s a nice saving, but always good to have a fully funded e-fund just in case.

  9. Mrs. Budgets @MrandMrsBudgets says

    June 11, 2015 at 12:31 AM

    Luckily Mr. Budgets and I haven’t had any emergencies and have pretty stable jobs. We have 6 months saved in a MMA. We do have a sum of money in taxable investments that we could easily use if needed.

    • Brian says

      June 11, 2015 at 9:35 PM

      Nicely done Mrs.B!

  10. Prudence Debtfree says

    June 11, 2015 at 11:03 PM

    “so much stress and anger to the emotion mix” – unfortunately, that pretty well describes what we experienced when we lost my husband’s income. We were not at all prepared for it. We are just about to start saving for our big emergency fund – probably around $20,000. Pretty small compared to your $50,000 stash, but I think it would do the trick.

    • Brian says

      June 12, 2015 at 6:46 AM

      Any amount to help insulate you from the unexpected is okay in my book.

  11. Janeen says

    June 12, 2015 at 11:12 AM

    I think you hit the nail on the head with your comment about not wanting to part with your money after having worked so hard to create a stockpile. That’s one of the things that has kept us from building “normal” American property additions like a deck and shed. We just don’t want to part with some of the savings that we’ve worked so hard to build (plus, we’re hoping to dump a large chunk as a final blow on the mortgage in a couple years).

    • Brian says

      June 12, 2015 at 5:46 PM

      Agreed Janeen, once you have it you really think hard about parting with it, unless it’s a true emergency.

  12. Chella says

    June 13, 2015 at 11:37 AM

    Sure Brian, an emergency fund is the best thing to ever have as a family. It saved us on several occasions while i was still living with my parents whenever there was any emergency!

  13. Shannon @ Financially Blonde says

    June 14, 2015 at 1:07 PM

    Our emergency fund has insulated us from SO many situations whether it was a doctor bill for my son or our toilet that needed to be replaced. Because I have seen the benefits of it firsthand, it’s a huge reason why many of my client’s first goal is to build the emergency fund. It not only saves you financially but emotional as well.

    • Brian says

      June 15, 2015 at 12:00 PM

      When you reduce stress financially, it trickles over into so many other areas of your life.

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about us

Hello, I’m Brian and this is my family. I started Debt Discipline as a way to help keep us accountable as we pay off $109,000 worth of consumer debt. Now debt free, my mission is to help our three children prepare for their financial lives, as well as others. I hope our story will inspire and motivate you to take control of your money. Let me know how I can help!

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