Why You Need an Emergency Fund

We had just recently gotten back from a trip visiting my parents across the country when I got the call that my dad was having a heart attack. As you can imagine, it was devastating and scary. As a daughter, my first thought consisted of ‘how fast can I get there to be with my family?’ So, I got on a plane that evening and found that my dad thankfully survived and was recovering well.  

Financially speaking, this could have been a very stressful moment. Suddenly having to come up with money for a very expensive last minute flight, rental car, and other travel expenses can add up to quite a bit. But instead, this was a moment that I praised God that I didn’t have to worry about money because we had an emergency fund. We had a plan.

What is an Emergency Fund ?

An emergency fund is an insurance that you create for yourself. It’s a sum of money you set aside for when the unexpected in life happens. The point is that when you have a crises that you couldn’t have planned for, you have money already waiting to be used. An emergency fund protects you from having to go into debt when your car breaks down, you lose a job, have to go to the hospital unexpectedly, or need to fly across the country before the end of the day to be with family during an emergency.

78 % of Americans live paycheck to paycheck. This means that for 78% of Americans there is little to no extra money left at the end of the month. In order to pay bills they are dependent on their paycheck coming in. Are you in this situation? You’re not alone but it does leave you vulnerable. If I’m honest with you, it really isn’t a matter of if you will have a financial emergency, but a matter of when.  

Now, I’m not here to scare you but to encourage you. Having money set aside for an emergency makes any crisis less stressful and not as likely to set you back significantly.

When Should You Have an Emergency Fund?

Yesterday. The answer is not when you make a certain amount of money or have hit certain financial milestones. Everyone needs an emergency fund no matter their financial situation because anyone can have a crises. Even if you are paying off debt you should have a little bit of money set aside for emergencies because they will happen. You don’t want to dig yourself into a deeper financial hole because you weren’t prepared.

How Much Should You Have in Your Emergency Fund?

Now this is a personal choice but if you’re paying off debt you should have anything from $1000 to one month of living expenses set aside. This should be sufficient while you are using all of your extra money to pay off debt. Once you are out of debt, it’s a good idea to create a full emergency fund of about 3-6 months living expenses. My opinion is that any more than 6 months is too much cash to have sitting stagnant. It would be better to do something more useful with the money.

Where Should You Put Your Emergency Fund?

That’s up to you but the only stipulation is that the money needs to be accessible quickly. Not tied up in complicated investments that would take time to extract money from. You can put it in a savings account or something similar so that it’s easy to access when you need it.

When Should You Use it?

This is the most debated part about an emergency fund. You should not use your emergency fund often and it is not an account to use when you don’t have enough money for something that you want or even need. This fund is like an insurance for you. It’s not for anything that you had time in advance to plan for like a vacation, Christmas gifts, or birthdays. These all can be planned in advance, therefore they don’t come from your emergency fund. Your emergency fund is for expenses that can’t be planned and are truly emergencies.


Having an emergency fund will take away much of the stress that comes from unexpected events. If you don’t have one, begin saving for it this month. If you do have one, make sure that money is set aside and not being used for regular expenses each month.  The next time a crisis comes, you’ll breathe a little easier knowing that you’ve planned ahead.

What do you think is the best part about having an emergency fund?

2 thoughts on “Why You Need an Emergency Fund

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