Why Starting an Emergency Fund Now will Save You Later
After a brief, uneventful visit to the vet earlier that day, my dog seemed “off”. She refused to eat her lunch and continued to display odd, but not alarming behavior. As the day wore on, a feeling of dread flooded my body and my heart rate quickened as I began to suspect that something was terribly wrong. I tried to steady my shaking hands as I dialed the emergency vet to let them know we were on the way.
The vet was gentle as he told me that my dog was septic and that her condition was life-threatening. He would need to stabilize her and then she would need to be transported to a critical care facility for emergency surgery. He estimated his cost at $5,000 and told me surgery and treatment at the critical care facility would be many times that, He asked if I wanted to proceed.
I wanted to scream YES! Of course, I wanted to proceed. But I knew that wasn’t really what he was asking. What he was really asking was “Could I proceed?”
At that moment, I’d never been so thankful to have been prepared.
The fact of the matter is we never know what life will throw at us. Murphy always is on the move. Some of it will be minor annoyances, some major headaches, and some heart-wrenching situations, where being able to focus on the situation at hand and not how - or if - we are going to pay for it, is truly a gift you can give yourself. Be prepared for the unexpected by having an emergency fund set aside. An emergency fund is the best defense against a financial emergency.
Many people don’t make it a priority to start, build, and maintain an emergency fund. But the truth is you can't afford to not have one.
A financial emergency could be an auto or home repair, medical expense, job loss, pet illness, death, or anything else requiring a significant amount of money on short notice.
Unfortunately, these challenges force many people to deal with the situation by using credit cards or taking out a loan. This simply makes the situation even more challenging in the long-term.
Do You Have Enough?
The general rule is to keep between three and six months of living expenses in a readily accessible account. Of course, that's just a general rule. The proper amount for you will depend on your specific situation. No two situations are identical.
Consider if children or pets are part of the equation - medical events and accidents with both are common. How much debt are you currently carrying? What types of insurance coverage do you currently have? How stable is your job? How healthy are you? Do you own a home? The answers to these questions will allow you to make an informed decision about the size of emergency fund that would be best in your situation.
Sudden loss of income is the most common reason for needing to dip into an emergency fund. If there is a job loss, bills still need to be paid. Finding significant employment can take at least a few months. Don't be caught without an income and without money in savings!
It is always best to have a plan in place for the worst-case scenario.
Situations will arise. It's simply part of life.
Commit to Taking Baby Steps
If you don't already have an established emergency fund and the thought of saving 3-6 months of living expenses is overwhelming, starting out small is fine. Even accumulating a single month of living expenses can take some time, so set small, manageable goals like a $1,000 starter emergency fund, and the odds of reaching your goal will be better.
The simplest way to get started is by opening a savings account at your bank. This should be an account separate from any other account you may currently have. You may even want to open the account at a different bank so that you are not tempted to transfer money from your emergency fund to your other bank accounts.
Get into the habit of making consistent deposits. They key is to automate the contributions to your emergency fund. Even just $10 or $20 a week can be a good place to start. Try to slowly increase the amount you’re saving each month.
Being Prepared is Always Less Stressful Than Being Caught Short
Have discipline and only use this money in times of financial emergency. A vacation, that beautiful cashmere sweater you’ve had your eye on, or an event you knew was coming but forgot to plan for (Christmas and birthdays anyone?) is not an emergency! Avoid dipping into your emergency fund to pay for expenses that aren’t true emergencies.
Having an emergency fund is a big part of maintaining financial stability. It protects you and your family from unforeseen emergencies and keeps you off the credit card treadmill. Get started today! Even a little bit can make a big difference in your confidence and financial security.
We all face financial challenges at times. If you're not ready when the time comes, you'll create more unnecessary stress for yourself for not having made the proper preparations. Be prepared for the inevitable challenges of life. Not only will it be easier to weather the storm, but you'll also sleep better knowing you're ready.
My dog didn’t survive her brief illness, but I will be forever grateful that my emergency fund was there, to allow me to focus on what was most important - her care - rather than stressing about how I was going to pay for it.