• Nancy

    Sometimes the old-fashioned way – save, not spend – is best. We have always lived well under our means and have had no problems meeting emergency financial situations that crop up from time to time. I also lean toward having money to cover six months of expenses (or more) set aside. When was the last time all your monthly expenses went down?

  • http://dollarmama.blogspot.com Cat

    I’m going the Dave Ramsey way- $1000 in an emergency fund and everything else goes to debt.

  • Mike

    I keep mine in an ING savings account, and have opened an Orange Checking account so that I can get the money out quick with the debit card if need since the transfers are immediate within ING. Also, by opening an orange account I was able to get an account bonus.

  • Gina

    Last year my husbands car ‘died’ unexpectedly. Although we were not happy to purchase a car before we thought we would need to, we were able to buy another car with the cash that we had saved in our emergency fund–NO CAR PAYMENT!

  • Eric Smith

    While Dave Ramsey’s recommendation of building up an emergency fund first is echoed by many, and is sound advice, I believe that his initial maximum of $1000 is too low. Take Gina’s example above, for instance. If she had only saved $1000, purchasing a replacement car – even a used one – would have been very difficult to impossible with only $1000.

    My initial Emergency fund goal is $5000, and I think I’ve got a good start; in less than 6 months, via cutting back on spending and selling a number of things (on eBay, Amazon and Craigslist), I have been able to save 50% of my goal. After I reach $5000, I will throttle back the money going to it and funnel that money towards debt (of which we have no CC debt, so we are lucky there). However, I won’t cut off my contributions to my E-Fund entirely. I will keep it on life support with a small, automatic contribution each month and let it build; the bigger the cushion, the softer the landing.

    Why $5000? In looking at the emergencies that might befall me and my family, I have found that $5000 would be the minimum to cover the most costly one – meaning our deductible from our health insurance; after that our health insurance would cover the rest. Or we could replace all of our most important appliances – furnace, water heater, refrigerator, etc. – or purchase a reliable used car if need be with $5000. Or it could also be used to cover 4 months of mortgage should one of us lose our job. To me, beyond the necessities – food, water, utilities, etc – health, shelter (including heat and hot water), and transportation are the most important items and should be the focus of the emergency fund. Everything else – cable, internet, TV, cell phone, etc, etc – can be dropped if needed.

    I would recommend looking at these main items and figuring what the minimum would be to cover the most expensive one and set your emergency fund initial target to that. Once you have reached your goal, continue to contribute to it with a small amount each month – thereby building a greater safety net – and a breath a sigh of relief knowing that the worst is covered.

  • Susan

    I totally agree and feel confident that our emergency fund is there for us. However, I really struggle with that amount of money just sitting there earning minimal interest in our online savings account. I wish there were a better option that still makes the money accessible relatively quickly.

  • KristyT

    We had a month’s worth of expenses saved in an emergency fund; I, the only wage earner, lost my job in May and didn’t find another one until August. Our emergency fund allowed us to keep our home this summer. Unfortunately, now comes the struggle to replenish it… it’s only got $50 in it now.

  • r0berts

    My father drilled in an Emergency fund since I left home. I used to think he was over-cautious, but I have thanked him so many times since. Its a must for me now

  • Charissa

    You have to pay yourself first and adjust your cost of living accordingly. Do you really need a cell phone and a home phone? What about telecommuting one or two days a week to save on travel costs?

    There are ways that you can cut back without depriving yourself. My husband and I have experimented with every frugal tip that we have run across. In fact, I have so much knowledge now that I plan to write a book on the subject.

  • Melissa

    I do my emergency fund a little bit differently. I have $1000 in a savings account linked to my checking that earns interest at a pretty low rate. The rest of my emergency fund sits in my Roth IRA. I can withdraw my contributions at any time without penalty and the last time I withdrew money I had the check in my mailbox the next day…faster than a high interest savings account.

    I invest my emergency fund in my Roth for a couple reasons. First, I have better returns there. Second, it’s way too easy for me to “borrow” money from my EF if its easy to access. However, since I pay a nominal fee to invest my contributions, you better believe I’m not going to touch that money for anything shy of a real emergency.

    I realize that I can lose my EF in the stock market, but I always keep some of my investments in pretty low risk mutual funds. I didn’t lose every last cent in the last market downturn and doubt I ever will.

  • Lauren

    I have a question for all of you who have reached your initial emergency savings goal. How did it take you to reach your initial goal? I’m slowly approaching my initial goal of $1000 but I always feel like I should already be there. I chose the $1000 amount because it was still a bit of a stretch for me but it’s doable. Once I reach the $1000 goal, I’ll set another, higher goal.

  • Mayra Cedillo

    Do any of you know the difference between 403 (b) and the other account geared for educators?

  • Connie

    On the list for this year. As well as an energy audit (we live in ontario and the government pays us to make our house energy efficient.)

  • http://grandgiveaways.wordpress.com Mami2jcn

    We started working towards this goal in 2009 and we definitely have at least 3 months saved. I was under the impression that 6 months was a must, so it’s comforting to know we’re okay at 3 months.

    I second the recommendation another person made about an ING savings account. We also have a Roth IRA.

  • Linda

    I was really hesitant at first at the thought of having thousands of dollars sitting still in a savings account when I could otherwise be using it to invest- especially as my highest interest rate right now was 1.5% at ING. But after a few months of research (enough time to save up half of my emergency fund anyway), I was lucky enough to find a tax-free savings account offering 3% at a local bank.

  • Jennifer Phillips

    This is so hard to do! With all of the job losses and living week to week and not making it on that I really wish we had done more when we had the chance. I hope that my children will learn from our mistakes and do the right thing. I try to read to them from this and some other blogs the importance of savings. One seems to be getting it, the other I am worried about. Our emergency fund was depleted when I had to go in for 3 different surgeries all in a row, and it was right when the job shut down, out of work no insurance. We will make it back, but I can’t say enough how important this is and to pass on the importance.

    • Erik Folgate

      Thanks for sharing that story Jennifer! It’s definitely a testament to the importance of having cash on hand to pay for life’s emergencies.

  • Dale Wyrick

    The emergency fund is key. I find that you have to make it a priority and after using the fund. It is important to reevaluate your finances and rebuild that fund. This is hard because you may not be in a great situation but that is your pillow to catch you when you fall. Make it too thin and the fall will hurt.

  • http://www.artificialrobot.com Sean

    My emergency fund is a bit anemic right now, but I’m hoping to jump start it with a bonus that will hopefully come through. I figure if I can get it mostly funded then it doesn’t seem like such a giant task. Then I can breathe a bit and save for other “things”

  • http://graduatedlearning.wordpress.com Stephanie

    I think my problem is that I don’t know when to stop! I probably have way too much money in my emergency fund, money that could be used to pay down debt or perhaps focused towards a financial goal (wedding, down payment, etc.). I did start a separate down payment fund, but I still feel like I’m being silly putting so much away.

    At any rate, until I can convince myself that I have a good enough emergency fund, I’ll keep putting my automatic transfers there…and once I find a new plan, I’ll continue to automatically transfer the money to a new goal.

    • http://icecreammachinereview.com Rick

      Stephanie, putting money away is never silly. Look at it this way, only money that is actually saved can be considered wealth. There are many people who earn a very good living, but spend every penny (and then some). Although they may drive expensive cars and live in big houses, those people are not wealthy. As your savings grow, so does your wealth.

  • not given

    My emergency fund is going to buy things we know we will need soon. Keeping our prescriptions filled, pantry filled, gas tanks full. Until bankruptcy is finalized what else can I do? I can’t start an emergency fund in case the trustee can take it and leave me without enough cash to fill my prescriptions or buy groceries or pay utilities.

    I don’t know when I can start putting away money in a savings account for emergency purposes, or even to pay my next auto liability insurance or property tax bill.

  • Taz

    Our emergency fund IS easily accessible…as cash in the house. We recently had our hot water heater go out…but did not have to panic because we had to the cash to pay for it. No credit, no interest, no bills later. I want to build it up further but am also working on debt reduction at the same time.

  • http://www.mirandamarquit.com Miranda Marquit

    Thanks, everyone, for stopping by and sharing your stories. Some of these are inspirational, for sure.

  • RandyMan

    A cash-only Emergency Fund should not be more than 6 mos of expenses. Here’s why … dividend yielding stocks (utils, tobacco, etc) earn from 4-9% and when that’s re-invested, it annualizes to 8-12% over a 10-20 years. And this only assumes a *flat* market, no cap gains. Thus, it works for a muddle-through bear market channel. If you’re out of a job, unemployment insurance can carry you, for a year or so, before you have to touch those 6 mos and if it really looks like you’ll never find work, you can cash out your stocks and then, go for re-training or re-location.

    • http://www.mirandamarquit.com Miranda Marquit

      Great point! Cash won’t provide you the same earnings that other choices might give. A great idea to use other means as well; your six months can give you enough of a cushion to keep going, and you have sufficient time to sell other investments if needed.

  • Roberto

    “For example, I pay my auto insurance quarterly and get four new tires on my car once every year.”

    Who replaces their tires once a year?!

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