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Do you have an Emergency fund, Rainy day savings, or Life Happens fund? Whatever you want to call it doesn’t matter just know you need to have one. Unexpected incidents will come up when you least expect it. Which can have serious consequences to your finances. It really doesn’t matter how well you have managed your budget or how much you earn, life happens to everyone every once in a while. So you should be prepared.

In case you are wondering… what is an “emergency fund”?  It is money you have saved for the primary purpose of taking care of emergencies like your car breaking down and need $700 in repairs, an illness that is raking up medical expenses your insurance doesn’t cover, an accident or unemployment. I like Dave Ramsey’s approach to have $1000 as your first goal as your initial emergency fund that is easy to access within a day or two without any penalties to withdraw. Then work up to having a fully funded emergency fund. Some experts say three to six months of living expenses is considered a fully funded emergency fund, while others say to have 9 -12 months of living expenses. However, it may seem a bit overwhelming and most give up too soon. So, I’d like to encourage you to start with plan to start setting aside a monthly amount for the year that you will save for your future emergency fund. Building up to one month’s worth of expense will take some time, and consistency, let alone three to six months. Start out small, just start with manageable goals and you will have a good chance to getting there.


Just so we are clear an Emergency fund is to cover “living expenses” as insurance in case you have no other income to manage your household expenses. It is not a savings account for maintenance or expected cost to replace appliances or vehicles. Those types of expenses should be in your budget as maintenance/replace fund. Where you contribute on a monthly basis to replace let’s say carpet in 3-4 years or for a new washing machine. The money should be readily accessible and it should be in a different account other than your checking account to help reduce the temptation to spend it on non-emergency incidents. As your account grows you can find other types of accounts that can earn decent interest so your money is working for. You don’t want to tie this account to stocks because of market volatility that can cause you to lose money.

Not having a plan to save for an emergency fund often leads people into debt because they tend to use credit cards to pay for emergencies and maintenance costs that come up. That only makes your money stress worse and creates a financial mess that is hard to get out of at the high rate of interest that is added to the bill. There’s real peace in knowing you have the funds to available if you have an unexpected expense or a job loss.