Everything You Need to Know About Emergency Funds

What is an Emergency Fund…..And Why you need one in your budget today.

I strongly encourage every single person to have a fully funded Emergency Fund.

I know, I know….it’s not fun to plan for financial emergencies, it’s much more fun to dream of buying the new and flashy.

But, I have never heard anyone regret having an emergency fund…..and I have heard many people regret NOT having one.

Do you have an emergency fund?  If you don’t, I suggest you begin contributing to one immediately.  I know this can feel overwhelming, so don’t worry!  This article answers the most asked emergency fund questions and explains all of the nitty gritty.

Everything you need to know about Emergency Funds and why you need one today

What is an Emergency Fund?

An emergency fund is money you have saved and set aside to be used in the case of an emergency.

Who Should have an Emergency Fund?

Everyone needs an emergency fund!  It doesn’t matter if you earn a million dollars a year, or are deep in debt, you should have money saved for emergencies.

The amount in the fund will look different to everyone, based on circumstances and need, but the fact that we all need, one stays the same.

Why Do I Need an Emergency Fund?

An Emergency Fund gives you a safety net for any financial burden that might arise.  This could be a job loss, large medical costs, or unexpected home repairs.

When Should I Use My Emergency Fund?

Please don’t use your emergency fund for anything other than what it is meant for (christmas gifts, traveling, and taxes are not an emergency, you should have a sinking fund for these types of expenses).

Try asking yourself these three questions when you are deciding whether it’s an appropriate time to spend your emergency savings or not:

Is it an Emergency?

Is it Unexpected?

Is it Necessary?

If you can answer yes to all three of these questions, than it is an appropriate time to use your emergency fund.

It is commong to experience guilt when you use money from your emergency fund. Remind yourself that it is OK!  You have been responsible in saving money, and it is ok to use this money when the time is right.  It is there to USE, when you need it.

But, be sure to replenish the fund after your emergency has passed.

How Much Money Do I Need in an Emergency Fund?

I highly recommend having at least 6 months-1 year of living expenses in your emergency fund at all times.   This gives you a nice large cushion, just in case your emergency lasts several months.

When my husband unexpectedly lost his job, I never imagined it would take him 7 long months to find a new one.  Having that emergency fund in place brought us a lot of peace and comfort.  If we only would have had 3 months saved…..the situation would’ve been an even bigger burden.

When you calculate your “living expenses” don’t add in traveling, eating out, or any other unnecessary expenses.  Living expense are the fixed expenses you NEED to live on.  If I have an emergency arise, I will not be spending money traveling, so I don’t need to save for that.

Living expenses should include:  housing costs, utilities, food, clothing, insurance,  gas, and any other basic needs.

Where Should I Keep My Emergency Fund?

Your emergency fund needs to be liquid, meaning it is kept in an account easy to get to.  You want to be able to access this money in short notice.  This should not be in the stock market, your 401k is not an emergency fund!  A regular savings account or money market account works perfect.


I’m curious!  How many months do you have saved for an emergency?  Do you think 6 months is enough, or do you want more saved…..just in case?  Let me know in the comments!


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