Enjoy this post written by my staff writer Jordann.
My emergency fund has gone through a bit of an evolution since I started it. At first it was non-existent.
I didn’t have an emergency fund in University. Money was tight, and I was more concerned about having enough money for rent, than I was about putting money away for a rainy day.
That all came to a screeching halt when I got in a car accident in the Summer of 2011. I was fresh out of school when I totalled my husband’s car and we didn’t have any money to fall back on.
The month that followed was anything but smooth. We had to deal with replacing the totalled car and a dozen visits to the doctor as my broken wrist healed. I missed time from work, and we both felt the financial strain.
The Origins of my Emergency Fund
Once that ordeal was over, I vowed to never again be caught so unprepared. So, I opened up my very first Tax Free Savings Account, and started saving. I still remember transferring that first $25 into that account.
It looked so pitiful, all alone in there. What good was $25 going to do in the event of an emergency?
But I kept at it, and over time that $25 grew to a few hundred dollars. Eventually I had around $400 in that account. $400 better than nothing for a first time saver like myself, right? I really wanted to get over a grand in that account though, so I kept up with my little $50 and $100 transfers, and my account slowly but steadily, grew.
My Baby Emergency Fund
My emergency fund finally got to the point where I could actually start using it about a year after I established it. It was sitting at about $1,600 at that time (I was aggressively paying off my debt, and slowly building my e-fund) and our new (to us) car needed some repairs.
No problem, I just pulled from the emergency fund. That’s what it’s there for right? Unexpected car repairs definitely count as an emergency. Just like an emergency fund for a car, companies like Insure 4 a Day can also help you insure your car when your car is in the shop.
It felt so good be not be totally thrown off course by a $300 car bill. Instead of looking at that bill in terror like I used to, I could just calmly say “I’ve got money for that”. What a revelation! Of course, as soon as I withdrew the cash, I wanted to replenish the account right away, and I did.
My Teenaged Emergency Fund
I’ve continued to add to this account (with some help from my husband) until it sits at a very respectable “Baby Emergency Fund” size of $2,200.
My emergency fund evolution isn’t done yet though. Once my debt is paid off, I plan on growing my baby emergency fund into a full-blown, healthy, “grown up” emergency fund. Instead of a small $2,200 in savings, I want to have 3-6 months of living expenses socked away, to insulate me from the lovely surprises life throws our way sometimes (like car accidents and broken wrists).
It’ll take a long time to build up this kind of cushion, but I’m not put off by that, I’m no stranger to saving. It’s going to be wonderful to finally build up some cash reserves instead of paying off dumb old debt.
My emergency fund started off small, but we all have to start somewhere, right? I have big plans for my emergency fund.
I’m curious, how much cash do you have set aside for a rainy day?
Related Posts
Legit Ways To Find Free Gas Cards + How To Save Money On Gas- 9 Most Important Money Numbers You Should Know
- 20+ Best Jobs That Pay $20 An Hour Or More
- Pros And Cons Of Tiny Houses (Is It Right For You?)
- Your 2023 Financial To-Do List (15 Things To Check Off)
- 10 Budget Friendly Meals (Easy, Delicious, & Affordable Recipes!)
Matt Becker says
It’s great that you weren’t discouraged by starting off small. Isn’t that how we all start pretty much everything? Like you, mine grew slowly over many years and I made an effort to increase my monthly contributions along the way. I also have separate savings for things like car repairs, which I consider to be expected even though you can’t predict when. For me, the e-fund at this point is really for big emergencies like job loss, disability or really big medical bills. But all of that took time to get to and I started out just like you, with a single savings account and a small amount of contributions every month.
FI Pilgrim says
One thing we do (that I recommend to others) is to live entirely on last month’s income. I’m a user of YNAB budgeting software, and it’s awesome for this, because if you haven’t socked away enough money for “next month’s” budget it shows you a big red negative balance (even if you’ve got money in your account). It’s been great for helping us keep that $3k cushion each month in case of emergency.
Love to see emergency funds growing, so many folks can benefit from having them!
Alicia @ Financial Diffraction says
I am still in Origins territory, sort of. I have a lump of money that is close to 4 months of expenses, but I am trying to leave tat alone in my TFSA to invest. So currently, I have a “new” Emergency Fund that has $475 in it. It is slowly growing into “Baby-size”. But if something large happens that would wipe out my small a emergency Fund, I can tap into some of the liquid funds in my TFSA.
DC @ Young Adult Money says
I also would really like to have 3-6 months stashed away, but I’m definitely not at that level yet. The security you can find in a well-funded emergency fund is great. Most people have access to some sort of emergency line of capital, like credit cards, but it’s so much preferable to have a cash reserve for when emergencies come up.
Brian says
I’m pretty much anti cash sitting in an account doing nothing. So I only have between $4-5K in a savings account. the rest of my money is working for me. I understand why some people feel the need to have a large amount of cash sitting around and if that is what it takes to make you sleep well at night then I say more power to you.
C. the Romanian says
We have managed to build an emergency fund that would cover about 8 months of living so we’re doing pretty well. I still want to make it go as high as 12 months of living, but there’s no hurry!
Alexa says
I’m at around $8,500 right now. I’m shooting for 10k though. Hopefully I’ll make it there soon!
Mrs PoP says
We fluctuate between carrying a buffer of $10K and $25K. It depends on what we see as our mood and priority at the moment.
Holly@ClubThrifty says
Our emergency fund probably has more than it needs at this point and I’m to the point where we might move some of it into investments or put it down on our next house. I agree with Mrs. Pop that 10k-25k is probably a reasonable level.
Little House says
My emergency funds have fluctuated over the years. But, I feel most comfortable when I have a few thousand sitting in them. I’m currently paying off debt, so my ER fund is looking a little pitiful at the moment, but I look forward to bulking it up at the beginning of next year. 😉
moneystepper says
I’m more aggressive that most when it comes to emergency funds.
I would say that only once every 5 years for me personally will something come up where I need to pay for something that is more than 1 months expenses tomorrow.
Therefore, I’m on the lower end and keep only 1 months expenses in completely liquid funds, and 3-6 months in investments which can be very easy liquidated, but I don’t intend on drawing on more than once in a blue moon.
For example, my boiler broke down and had to replace it for a good amount over one months expenses. So, I just waited until payday and wore a lot of jumpers in the meantime!! 🙂
Erin says
My husband and I have just $1000 in our emergency fund right now. We’re aggressively paying down our student loan debts, and feel comfortable with $1k for unexpected expenses. Once our loans are gone, we’d like to have the 3-6 months expenses built up too!
This Life On Purpose says
I don’t have a distinct emergency fund account (maybe I should?) but I have a high interest savings account that I transfer money into every pay cheque. The money is there for unexpected expenses, travel and large upcoming expenses (downpayment maybe?). I have probably 1.5 years of living expenses in there. Maybe too much, but it’s more than just my emergency fund.
Jaclyn @ Debt Free Dreaming says
We have about 4k in savings right now. We hope to have saved 6k by the time our baby is born on Christmas. Inevitably, we’ll have to spend some of that to prepare for the baby’s arrival, but that’s what it’s there for!
Shannon @Financially Blonde says
I think a “healthy” emergency fund is the number one key to financial success in life and yet most people do not focus on it enough. I think the fact that you even give it attention is fantastic! I advise my clients in their 20s and 30s to max out emergency funds and not retirement funds.
Stephanie says
Hi Jordann. Right now I’m just throwing everything at student loan debt, I figured I start an emergency/savings fund after that. Do you recommend I start now putting away a bit of money? Before the debt is paid off?
Newlyweds on a Budget says
we have about 13 grand in savings accounts right now, but we’ll be using about 9k to pay off the rest of our debt in january (we would have had about 30k in savings this year if we didn’t have to pay off student loans hmph). 2014 will be all about building up our savings since we will no longer have to pay off debt! we plan on saving for a house down payment, and we’ll use that as an emergency fund until we buy a house. Then we’ll start over with replensihing a real emergency fund. our jobs are pretty stable though as far as jobs go so I’m not TOO worried. We’ll definitely need insurance for in case we have an unexpected disability or something like that.
Martin says
It is great to see that things worked out well for you. I am starting my fund and it is still very small like yours once was but it is very comforting to know that you have a degree of protection if you have an issue.
Practical Cents says
I have about 1 month of living expenses saved up in my emergency fund. I am also working on paying off debt this year so it’s low at the moment. My goal is to have at least 6 to 8 months saved up.
Ree Klein says
Hi Jordann,
Having an emergency fund is a critical part of being responsible with money. Much like you, I was broke when I was young and to me everything that wasn’t a trip to the grocery store or paying rent was considered an “emergency.”
I’ve since evolved to this way of thinking: Everything except a job loss can be considered an expected expense. Even having to replace a car. So here’s what I do…
1. I have an emergency fund sufficient to cover a minimum of six months of expenses.
2. I save for “future capital expenses” to ensure that I can replace a car, go on vacation, buy gifts, etc. I explain more about that here: http://buff.ly/1c0oXQs
You are definitely on track to build real wealth over time. I know it can be done based on my personal experience. Great post!
Ree
Tanya says
We have about one months income stashed away. We really would like 3 months of income in our savings. Once we pay off our debt we will add more to it. Its nice to know that when something comes up it won’t “hurt” too bad because of the money we have stashed away.
Meghan says
I only have enough for rent for a month, right now. My plan is to build that up to 2 months of rent soon. I have a secure job, so I feel okay without having 3-6 month reserve for now. My current savings goal is $500 to cover my state taxes for my former state of residence. They’ll be $500. Then, I want to save $2000 for moving expenses. Then, I have to save for a car. My total savings goal is about $21,000.
jackie says
great work! mine always has a few thousand in it, but i’d like to grow it even more. i’m hoping to transition careers soon so i’m trying to save extra in case there are a few slow months.
jefferson @See Debt Run says
The emergency fund was absolutely essential for helping us get out of debt.. I don’t think we could have done it without it. These days, we are trying to grow our fund to be able handle a more extensive income outage.
Carolyn says
I have about $2,500 in my fund so it also is in the ‘baby stage.’ (Quite literally, in fact, as I am expecting a baby in just a few short weeks and will use most of this during my maternity leave to help with costs that aren’t covered. Without this fund, I’d be sunk!!). Like you, I’m planning on building up my emergency fund quite significantly once my debt is paid off. I totally agreed with you in the beginning with feeling like that first $25 is so measly. As my fund grew, so did my aggression with wanting to stalk away more and more. Sometimes I get depressed with wishing I could put away more each month rather than throwing that money toward debt. But this is where you live and learn. I know now the effects of having so much debt and how limiting that is to your life. Never again!
Morgaine says
I had gotten my EF to just over $1K (and other various amounts) but drained it to make my final payments to my consumer debt. I tried growing it again but found it was making more sense to pay off our renos faster (only $2,200) which has a 7% interest rate. As soon as that’s paid off I very much intend to aggressively save next year.
Congrats saving a good EF while paying off your debt! 🙂
Pauline @RFIndependence says
I don’t have special cash earmarked emergency, I actually get itchy to invest every time I have over $5K. At the moment I have quite a bit more and am pacing myself to invest wisely. I prefer to break an investment in case of emergency than having cash earning nothing
Latoya @ Sisters' With Bank says
We have recently started aggressively building up our baby e-fund. In the past two weeks alone, we’ve had $300 in unexpected expenses arise when we had a leaky garbage disposal, roof, and hot water heater go out twice. It quickly seemed like we took three steps back because we emptied our savings, but I’m so glad it was there. The costs were to cover the costs of our deductible on our home warranty, but in order to get all three fixed would have been way more than that. I’m grateful that we had the warranty and a little saved. Now we will keep aggressively going at it until it’s fully funded. Fingers crossed that both of us will get there sooner than way later:)
krantcents says
Starting small is the best way to get started! Too often, people dismiss doing anything at all. You can always add to your savings or investing. Starting is the hard part.
Stefanie @ The Broke and Beautiful Life says
I’ve got about $5,000 set aside for a rainy day… unfortunately, unemployment means it’s currently raining :/
Kristopher N. Castillo says
No problem, I just pulled from the emergency fund. That’s what it’s there for right? Unexpected car repairs definitely count as an emergency. Just like an emergency fund for a car, companies like Insure 4 a Day can also help you insure your car when your car is in the shop.
dojo says
We have placed money in the emergency fund and taken it off, when needed. The last months have been tougher, since we’re expecting a baby and there are also a lot of taxes to be paid. But we do save in the EF and it helped us not get into debt, if we needed to cover something ‘unexpected’. I know how it’s like to not have any money and now, that we do have our small ‘cushion’ I’m really more relaxed. Just as you said, anything that comes our way is no longer such a huge deal, it’s something we can easily cover and then move on.
Rebecca says
I try and keep at least 3 months worth in my emergency funds. I didn’t do well with it as a teenager, but once I got into college, I started to build up my emergency funds and set a specific number to get to every year.
Sky says
My emergency fund is all but nonexistent right now. Definitely something I need to change ASAP. Even just having 1k sitting in an account would be a comfort.