emergency fund

10 Reasons You Need an Emergency Fund & How To Start One

Nobody likes thinking about all the things that can go wrong on any given day. But unfortunately, it can happen, something can go haywire when you least expect it.

I can’t tell you how many times our emergency fund has saved us in the last couple of years.

Approximately 4 years ago, I had an early morning flight I was trying to catch when out of nowhere came a deer that I ended up having a minor run-in with. This unfortunate accident resulted in me crunching the front half of my car.

Of course, this situation was stressful and annoying. However, lucky for us this wasn’t a huge financial burden because we had money in our emergency fund.  Without an emergency fund, I would have been carless for several months with thousands of dollars racked up on my debit card.

Today I want to chat with you about what an emergency fund is, why it’s important and how you can begin building one to protect yourself against life’s unexpected events.

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What exactly is an Emergency Fund?

Many people don’t understand what an emergency fund is and when it should be used.

In simple terms, an emergency fund is cash that you’ve saved to help you maintain normal life through the emergencies that life throws at you.  It’s one of those “just in case” accounts.

Just in case your car breaks down, or you have to buy a new water heater. In case you have to take your child to the emergency room and make a payment up front.

With an emergency fund in place, you don’t have to stress about the “what ifs” in your life.  You can simply take a deep breath and move forward with confidence knowing you are ready for any situation life throws at you.

3 Benefits of Having an Emergency Fund

  1. It reduces money-related stress
  2. Helps you keep you from going into debt
  3. It protects you and your family

Do you have an Emergency Savings Fund?

It seems that a lot of people are beginning to think about emergency funds. Frankly, I think that’s a good thing – emergency funds are a key part of a healthy personal finance situation.

10 Reasons You Need An Emergency Fund

Here are 10 real-life reasons why you need an emergency fund and how you can begin saving for your emergency fund. Knowing that you have a financial cushion can do a lot for your quality of life.

Follow these tips to learn why you need to stash away some Emergency Cash for those unexpected events.

1. Protects your family in case of a job loss

With 3-6 months of living expenses tucked away you could comfortably live off the emergency fund savings while you take your time to search for the next perfect job.  Rather than being forced to accept the first offer that comes along.

2. An Emergency Fund Provides reserves for health problems or other family emergencies

You never know when a medical emergency will happen.  As someone that works in the hospital field, I see this all too often. An emergency or debilitating illness can cause someone to not work for several months.  An emergency fund could help you weather the storm.

3.  An Emergency Fund provides support for car problems

You never know when that warning light on your dashboard is going to flash or a plume of smoke will puff from under your hood.  Having an emergency fund will allow you to pay for the tow truck and any car repair problems.

4. Allows for home repairs

Sure you may have insurance to cover the major home expenses.  However, do you have the cash to pay for your high deductible insurance policy?  For example, my husband and I had to pay $5,000 to re-shingle a deteriorating roof on our home…..an expense not covered by insurance.

5. Provides for the unexpected bigger than expected tax bill

What are you withholding?  Are you having enough taken out of each paycheck so that you don’t end up having to pay money to the IRS at the end of tax season?

6. Unanticipated travel

Purchasing a last-minute plane ticket for a death in the family can come at an exorbitant price.  You don’t want this kind of expense lingering on your credit card.

7. What?  We aren’t expecting a child!

Unexpected pregnancies happen.  But having an emergency fund allows you to be in a better position to prepare for your new baby and in times where finances are scarce such as your job not offering paid parental leave.

8. Upfront apartment expenses can be expensive

You’re evicted from your apartment because of an unexpected issue. Moving can be a true budget-buster when you don’t have time to plan.

9. Your dream job forces you to move to an expensive living area

Finding new housing, arranging to transport your belongings and the many other associated costs can be very expensive.

10. Reduces stress, increasing health and well-being

Living paycheck to paycheck when an emergent situation occurs can be very stressful. Having an emergency fund allows people the mental freedom to know they are able to be financially stable.

11. Furry friend emergency

Like every other member of the household, our furry friends can get sick too.  Painful as it can be our animals may need surgery or other long-term care.

Reasons why you need an emergency fund


What is an Emergency Fund For?

An emergency fund is a savings account set aside specifically for those unexpected situations.

Most of the time, you shouldn’t touch the emergency fund– it just sits there earning interest and waiting until you actually need it.

Having an emergency fund means that you have room to relax. You don’t have to panic if you or your significant other loses their job, a car breaks down, or you have to re-roof your house.

how to save for an emergency fund

How to start an Emergency Fund

Keep your target reasonable and achievable.  Don’t shoot for more than you can manage and risk giving up altogether.

Instead, a good way to start is to set a goal that’s more reasonable.  Make it your initial goal to have an emergency fund of $400 or $500. That’s a goal that most can reach in a few months, and yet it’s an amount that can make a big difference if you are hit with an emergency.

From there, you can break new goals into smaller goals. Perhaps you can save a $25 a week. If so, you will have an additional $250 in emergency money in just ten weeks.

Maybe you can stash away $40 a week, which would bring you an additional $500 in only three months.

How Much Emergency Cash Do I need?

This may come as a surprise, but you don’t need thousands and thousands of dollars in emergency cash set aside. Ultimately, the size of your emergency fund depends on your lifestyle, goals, and current circumstances (home ownership, paying off debt, kids)

If you don’t have a lot of financial obligations you can probably get by with less cash in your emergency fund. 

On the other hand if you own a home, have children and rely on irregular income you should aim for a bit more in your fund.

Many financial experts recommend an emergency fund that is 6 months worth of living expenses.  This will protect you against the majority of the 10 concerns listed above.

Our advice is to not set your savings plan too high at first.  It should challenge you just a bit, but not be a number that’s simply unreachable.

The more money you can stash away the better prepared you’ll be when “that” day comes along and you need extra cash.


Where should I keep my emergency savings?

Having an emergency fund is all about having accessible cash when you need it most.  Therefore you’ll want to keep your money in an account where you can access it quickly and easily.

High yield savings accounts and money markets are safe places to keep your money.  These accounts are federally insured up to $250,000 and allow you to earn interest on your savings

This is new, give it time

You’re thinking, “That’s great, but where the heck am I going to come up with $40 a week? I can barely make ends meet now.”

That’s a pretty typical feeling from those who are just beginning this financial endeavor. However, there are many different ways that a person can come up with a bit of extra money each month.

How to Build An Emergency Savings Funds

Make a Budget

Creating a budget will help you reach your emergency fund goals much faster.

When you have a budget in place you have a clearer picture of what is going on with your finances.  It allows you to see how much you can stow away into your emergency fund each month.

Prioritize Your Savings

I’m sure you’ve heard me mention that you should “pay yourself first.”  The goal of paying yourself first is to treat saving money just as you treat any other expense.  Make it non-negotiable.

Each time you receive a paycheck decide how much you are going to deposit into your emergency fund savings.  Even if you don’t have a lot right now just do what you can.  Saving a little bit is better than nothing.

Ways to Cut Costs and Increase Income

A great way to trim costs and save money is with a free tool called Trim. Trim tracks your spending and looks for places in your spending where you can save money.  Trim will negotiate bills on your behalf and cancel unwanted subscriptions.

Credit cards

Start by asking for a rate reduction on your current credit cards. Often, the negotiation process is as simple as asking your creditor for a reduced rate.

Look for a new 0% Balance transfer offer

Back in the day, we made some large purchases causing us to be i n debt. Not too bad, just enough for us to be concerned. We researched, applied, and were approved for a 0% balance transfer credit card.

This transfer allowed us to move our hefty high-interest debt to a card that offered 0% interest for 18 months. This simple act really saved us.  We were able to make large strides in paying off our debt in under 8 months.


Comparison shop for auto and homeowners insurance before renewing your existing homeowner’s insurance policy each year.  Check out the rates of competing companies. Try Progressive, Geico, American Family, State Farm, and AIG, for starters. Just visit their websites, get some quotes, and make a switch.


Plan your meals in advance and stick to a list while grocery shopping. People who do food shopping with a list, spend much less money than those who decide what to buy when they get to the store. The annual savings could easily be thousands of dollars.


Use public transportation.   Most metropolitan areas have surprisingly good public transportation options – and they’re far cheaper than driving yourself.

Make Some Extra Cash

One of the best ways to build your emergency fund savings quickly is to look for alternative ways to earn extra money.  You could pick up a part-time job, start a small side hustle or sell things that you no longer need.

Make it automatic

After following the steps above you have now trimmed $50 a week from your spending, and have a little bit of extra money.  But now you have this cash sitting there and it’s tempting to spend it on something more exciting than an emergency fund.

You’re tempted…but… you don’t have to be tempted. Instead, you can set up an automatic savings plan to sweep that money straight out of your checking account and into your savings account that you’re using for an emergency fund.

Try the Acorns app to start saving with your spare change. You’ll have an Emergency Fund in no time.

Set reasonable milestones along the way

In a few months, you’ll hit your first milestone – you will be excited, it will feel good.  Your account will have enough money in it that it’ll start earning a bit of interest of its own and you’ll start to feel in control of the situation.

Now’s the time to keep going. Set another goal – an emergency fund of $1,000. Keep that automatic savings plan in place and keep it rolling in.

Once you reach that goal, aim for a single month’s worth of living expenses. Then two months. Then three. And just keep watching that emergency fund grow.

You might just find that this is a lot of fun.  So fun that you may start seeking out additional ways to save. Just keep setting goals for yourself and keep pushing yourself just a little till you make it where you want to be.

Before you know it, you will have a considerable emergency fund and you’ll sleep a lot better knowing you accomplished your financial goal.

Motivation to save

If you need some motivation to save a bit more, print a copy of our top 10 reasons to have an emergency fund and tape it to your bathroom mirror, put a copy on your desk at work, or keep it in your car.

Read it frequently, until you can feel the power of cash and how saving is more powerful than spending.  Saving money isn’t so bad after all.

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