emergency fund savings BF Blog

Emergency Fund Savings

When I started working, I always felt it was important to save. I called it my Rainy-Day Fund.  I would withdraw from it whenever I ran a little short from overspending.  It prevented me from ever having to borrow money from others.  I never understood the point of borrowing because you would eventually have to pay it back and then be short once again.  It seemed logical to just spend less and save more.  It’s always good to be able to keep a few thousand in the bank just in case. This was the beginning of my Emergency Fund Savings saga.

Fast forward to life happening, getting married, having children, and buying a house all in within a year.  That can really tax a budget and exhaust a savings account.  Leaving us to live paycheck to paycheck.  For the first time, there were more bills than a paycheck.  We could certainly use an emergency fund now to get by.

Emergency Fund Savings Blog - BF

Emergency Fund and Financial Independence and Security

First, the main benefit of an emergency fund is that you are prepared for life to happen.  Second, you do not have to borrow from friends or family.  Per Synchrony Bank Survey 99% of savers say independence means the ability to pay all bills each month.  Third, you are on the road to financial security. You can now begin investing in your future.  Once you reached your goal of 3-6 months of expenses you can begin to move those funds into investing in a retirement fund. Per Synchrony bank 92% of savers associate financial independence with a retirement plan.  Finally, you can then begin to save for your children’s college funds.  The sooner you begin faithfully saving you can begin to secure your future by having your money begin to work for you.

I have followed this plan for years and now my fully funded retirement plan is working hard to reach our goals of retirement.  Money makes money.  It all started with the Emergency Fund.

Emergency Fund Savings and Job Security

Some people are blessed with being on the same job for 20 plus years receiving incremental raises, with a 401k plan and a pension.  This is the American dream that many do not experience. Instead, some have experienced job loss multiple times over their careers.  Without job security, this can wreak havoc on a budget.  While looking for another job unemployment just does not cut it.  It barely covers rent or the mortgage not to mention food, utilities, and transportation.  Here is where your Emergency Fund kicks in.  Unemployment now becomes a supplement to your Emergency Fund making your 3 to 6 months savings last for 6 to 9 months affording you plenty of time to find just the right job at just the right pay to re-build your emergency fund.  A win-win!

Now you can be Generous

Imagine being able to help others in need.  Those who have not yet been able to set up their own Emergency Fund.  You now have the opportunity to share why you are able to help without it being a hardship to yourself.  This gives them time to get on their feet and to hopefully pay you back.  However, if they can’t it will not harm your finances in any way.  Therefore, you should have about 4 to 6 months saved and have a set amount you are comfortable lending with the expectation that you might not see this money again.  Think of it as a gift that if it is returned it is a blessing.

Set up your Emergency Fund Plan

It took years of working to get out of debt, living within our means to get back on track with having an Emergency Fund.  As we began to make more money and work our budget, we were able to free up funds to create an Emergency Fund.  Not only did we create personal emergency funds for each other, but we also created an Emergency Fund for the house. 

Emergency Fund Savings Blog - BF

The need for an emergency fund savings goal is an important part of the budgeting process.  Set it up as an automatic transfer per your payday.  I would transfer as little as $5 up to $50.00 per pay period based on your salary and current expenses.  I began small with a starter fund of $500 to $1000 to cover small unexpected expenses like medical co-pays, dental bills, small car repairs, unexpected guest expenses.  Once you have at least $1000 begin to move into creating a real Emergency Fund savings account.  This should cover 3 to 6 months of living expenses.

Your living expenses should include the following:

-Rent/Mortgage

-Utilities

-Food

-Car Note

If you have saved a 12-month emergency fund you can then include other expenses such as loans, credit cards, etc. Use this Emergency Fund Calculator link to help you determine how much to save and for how long.

Best Emergency Fund Savings Accounts

Finally, once you hit the $1,000 mark, consider moving your funds to high-yield savings accounts.  This is where I recommend putting emergency fund savings. This type of account pays more in interest than traditional savings accounts. Per Money Magazine High-Yield savings accounts have much higher interest rates than standard savings accounts, with some offering up to 5 times the national average. It allows your savings to start working for you. Look for accounts that have no minimum balance requirements or administrative fees and are FDIC/NCUA insurance. 

Emergency Fund Savings Account - BudgetingFaithfully.com

In conclusion, having Emergency Fund Savings account is one of the main components of managing a budget.  It is one of the engines that drive the train to financial security.  It will allow you to have financial independence, to eventually save for your future, and help others in need.  Read my blog Checking and Savings Accounts to learn more.  If you are just starting your budgeting journey please read Setting Up a Budget for Beginners.

Let’s Budget, Spend and Live.

Sabrina

52 thoughts on “Emergency Fund Savings”

    1. sabrinaanthony.media

      We have all made poor choices with money. As long as we get back on track that is all that matters. Thanks for your support.

  1. We have passed financial advice to our kids and they have their emergency fund and only debt is college that they are paying off quickly. Great advice for everyone.

    1. sabrinaanthony.media

      Thank you I agree. All my kids have emergency funds. My youngest is done paying off his college loans. The older one is still working on his.

  2. I so wish I had listened when my father told me to put $100 a month into an IRA. I would be so set for retirement now! We do put money into our emergency fund religiously and never touch it for anything other than an emergency.

    1. sabrinaanthony.media

      When we are young we think we have plenty of time. We are all guilty of procrastination. It is never to late to start saving. We are playing catch up too. Thanks for sharing.

  3. Such great tips! We have worked hard to build up our emergency fund too. It can be challenging, but the piece of mind is so worth it.

  4. No matter how little money you’re making, it’s SO important to have at least some sort of emergency fund. Very important information and well presented!

  5. This felt like something I really needed to hear. We have worked so hard to be debt free over the years and the past few months we have demolished that. It’s time to get back to work on our budget. Thanks for the nudge.

  6. My husband and I keep an emergency fund. This is one piece of advice we encourage others to set up. We think it’s important to start establishing one even while paying off debt. A little bit can add up over time and save you a lot of stress and headache.

  7. Great post! We’ve saved up to a 3-month emergency fund. Now, we’re trying to figure out some extra retirement savings before moving onto the kids’ school funds.

  8. 1. Don’t get in Debt 2. Have No Debt 3. Quit buying stuff 4. Have lots of liquid assets 5. Invest
    My mantra. The only debt I ever had was a mortgage, until my husband’s illness. Then I was $175,000 + in debt. Four years later, back to zero debt. It feels great!

  9. This is great advice. I can’t tell you how important it’s been to have funds moved regularly directly from my paycheck to a fund and pretend it’s a mandatory tax.

  10. You are so right! I’m learning this at 41, and I wish I had this info way earlier! I learn my lessons the hard way. BUT now I can teach my three kids to manage better!

  11. An emergency fund can be life changing. I lived paycheck to paycheck for years. Once my husband and I
    built up our emergency fund… I needed a root canal. For the first time, I didn’t have to panic about what we would do. Our emergency fund gave me so much peace. Now we have an emergency fund and savings. After living most of my adult life in debt, we finally have no debt other than our mortgage, and I feel rich.

Leave a Comment

Your email address will not be published.