3 Reasons You Need An Emergency Fund (& how to get one fast!): You know you need one, but chances are you may not have started to build your emergency fund.
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Let me give you three compelling reasons to get started:
stuff happens. stuff happens. stuff happens.
Our most recent example of stuff happening occured last week when I made a payment of $200 using our debit card. Unfortunately the person processing the payment didn’t get the memo and charged us $2000 instead.
As you might imagine, this caused some problems with our account. Banks are not very understanding when a withdrawal is made from your account that equals more than your total balance. Even though I contacted the company and our bank, the money was not returned to our account for six days! Meanwhile, life continued. We still had to put gas in the car and food in the fridge.
Thankfully, we had a few hundred dollars in cash in our “at home e-fund” which we were able to use for the daily necessities until everything could get straightened out.
Even if (or maybe especially if) you are “barely making it”, you can start your own emergency fund and create a “stuff happens” cushion with these three steps:
Designate a savings location.
Ideally you should set up a separate bank account, but at a minimum you need to choose an envelope, jar, corner of your sock drawer or some other location in your home to drop the cash. Having a place to put the money makes you more likely to actually save it, and it keeps the money out of your wallet where you are likely to spend it.
Take immediate action.
Find ways to get money into your e-fund as soon as possible. Here are a few ideas to get started:
- Eat cheaper meals for a couple of weeks (check my Cheap Meals List here), and put the extra grocery money into your e-fund.
- Take your lunch instead of eating out.
- Skip soda and coffee for a couple of weeks and put the money into the account.
- Sell things around your house on Craig’s List or at a yard sale. (Check out Where to Sell Your Clutter to Make Money.)
- Work more. Ask for overtime or other work opportunities.
- Cut out all entertainment, non-essential shopping and extra spending for the next month.
By combining these strategies and sticking with them for the next few weeks, you should be able to add several hundred dollars to your account. Read my 7 Best Money Making Ideas here for some other creative ideas to get money quickly (and legally)!
Commit to save the money for emergencies only.
Ordering pizza on Friday night because you are too tired to cook does not constitute an emergency, neither does shopping for a dress for an upcoming event.
True emergencies are things like a car accident, job loss or illness. Commit to yourself and your family to never spend the money for frivolous items.
Do you have an emergency fund? How has it helped you in the past? Leave a comment. 🙂
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I love this blog, its nice to know others are in the same boat as us and its a choice to live simpler. I am wondering if we should start this emergency fund now or use the extra money to pay off our 2 small loans ( one is 500 and the other is 600) first then start the savings?
Hi Amanda – I always prefer to have some emergency savings before paying off debt because if something occurs and you have no savings, you will almost always put it on a credit card, which creates more debt.
Depending on your needs you could start with as little as $500 in the savings account, but I prefer to keep $1000. Personally, if we have to spend the savings on an emergency situation, we make it our top priority to replenish it as soon as possible.
i love your blog. as a newlywed, i get lots of ideas how to organize our small house.keep on!….thanks! blessings to you and your family! 🙂
I am so glad that I have some ideas that you can use. Thanks for taking the time to let me know. 🙂
When I was growing up my grampa always impressed on us the importance of keeping some money in the car. He used to tell us all the times it saved him.
I’ve adopted this habit from him and keep some quarters, change, dollar bills and $20 in both of our vehicles. It’s locked up in the glove compartment, but it’s there if we need it.
If the card doesn’t work, if the machines are down and only take cash, or ( in our state) a tornado hits and we evacuate, the cash would come in really handy!
I cant tell you how many times that cash came in handy!
Our second emergency stash is just kept in the house – just $100 or so. It’s always good to have at least a small amount held in cash at your physical address in case you can’t get to the bank or something crazy happens.
Then keep the bulk of your emergency fund in the bank. We keep ours in two banks – a local bank that we can access immediately; and the online bank that we can access via ATM. This way you aren’t limited by withdrawl/atm daily limits if for some reason you need the whole amount at once.
It’s like the old adage – don’t put all your eggs in one basket. 🙂
That is a great idea to divide up your emergency fund Hannah. Thanks!
I wish we had learned the lesson without a scare but I now keep multiple funds both cash and in separate bank accounts. I have money moved right from our weekly paychecks so I can’t spend it and thanks to few emergencies (knock on wood) the fund has grown quite nicely. When the times comes – which it will – we will be ready this time.
That is so smart to move the money to another account FIRST before you can think of ways to spend it Jennifer. I know that has made the biggest difference for us.
One month, we were paying our energy bill online. The site was slow and clicking fingers impatient, so the button was clicked twice! We inadvertently paid our gas and electric bill for two months , not one. Thank GOD we had $1,000 in an emergency fund to pay that bill by quickly moving it to the checking account. We then replaced the money that came out of the emergency fund, and it’s all set once again!
Thanks for sharing Liz. That is another great example of why it’s important to have emergency money.
Yes we have an emergency fund, because we had a scare with my husband’s job a year ago. We stopped everything to beef our Emergency Fund up to 7 months of living expenses. I am still not satisfied with that but we agreed to get our house paid off before we take it up to a year of living expenses. We still put money into savings in the range of a few hundred dollars instead of thousands of dollars. We are using the large dollars to pay down our mortgage!!
I got a second scholarship money and it is not yet clear if I will have to give it back in case I decide not fully to return to my country. So I simply pretent that this money does not exist and use it as a buffer (it is on my second account). ln February I had to give 700 euros for the conference, and even though I will get the refund, the paperwork takes a while. The real emergency when I had to use it was when I locked both pairs of keys in our house while doing the garbage in pijamas and had to pay key service to open the door (the most painfully spent 300 euros ever).