What is an Emergency Fund Really For?

emergency fund

First things first, when it comes to discussing an emergency fund, there’s bound to be some disagreement because we all have different opinions of what constitutes as an emergency. Still, I think it’s a worthy topic, so let’s jump in shall we?

Why Do Experts Recommend Emergency Funds?

What’s the deal with these things anyway? Why are we supposed to have them? Most financial experts treat them as a necessary part of any financially savvy person’s life. However, I have come across an expert or two who say that if you’re really good with your money, you don’t really need one at all (because technically, you’d make more money investing it, so if an emergency happens, you could just sell some of your shares.)

However, I have an emergency fund for one reason and one reason only: to prevent getting back into credit card debt. Being in credit card debt wasn’t fun. In fact, it was pretty soul crushing, and I didn’t even have that much of it compared to some of my savvy PF friends (I had about 6k.) So to me, having my emergency fund there means that if something bad happens, I won’t have to swipe the card and put an amount on there that I can’t afford to pay off at the end of the month.

What is an Emergency?

In my opinion, these are examples of situations that would require me to make a withdrawal from my emergency fund account:

1. Buying a new-to-me car if a car accident totaled mine.

2. A very sick husband or child who needed my help and thus caused me to bring in less income because of the time required to take care of them.

3. An unexpected home repair that was necessary for living safely in my house.

4. A last minute flight that I needed to purchase because a parent was very sick.

5. Depending on the severity of the issue, an emergency vet visit for my dog. If she was old and had cancer, I would likely not prolong her suffering, but if she ate a sock and required emergency surgery that would allow her to live several more years, I would definitely pay for it because that dog is my kid.

My emergency fund isn’t for a much needed vacation, a lifestyle upgrade, or – if I’m being honest – bailing a friend out of financial trouble. The fund is set up for serious issues that come up in my little family of 4 and us alone. I’m sure not everyone will agree with this, but that’s why personal finance is personal, after all. :-)

How Much Should You Have In An Emergency Fund?

I think the general consensus is six months of living expenses, so I should add a few thousand more to mine. If you are just starting out, $1,000-$2,000 will cover most of life’s uncomfortable expenses that tend to crop up from time to time. Then you can add to it as you are able. (Editor’s note: I would have to agree on Cat with this amount to start out with – even as little as $500 is a great place to start and should, generally speaking, be based off your specific needs. The point is to start one with the intention to build it and thus will look different for everyone else. My wife and I have eight months of mortgage payments and four months of living expenses – working towards 12 and 6 months respectively since we work for ourselves and want that amount to give us peace of mind. That said, my peace of mind is going to look different from yours and vice-versa. :-) )


What do you consider to be an emergency? Do you currently have an emergency fund?


Photo Credit: A Magill

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Catherine Alford is a personal finance freelance writer and blogger. She received a B.A. from The College of William and Mary and an M.A. from Virginia Tech. When she is not writing for other websites on all topics frugal and fabulous, she enjoys sharing her adventures on her blog,

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