What’s an Emergency Fund? (+ How much should be in yours!)

EMERGENCY – are you prepared for one? Rather, is your bank account prepared for one? Emergencies are like accidents – you never really think it’ll happen to you until you’re stuck in the eye of the storm. And jumping right into the financial side of things, an emergency fund is sometimes the saving grace you never knew you’d need, but were thanking your lucky stars you had when the storm hit.

I hinted at more to come on an emergency fund a few weeks ago, and here we are – pour some coffee, friends! Having an emergency fund is essential to upleveling your financial game. It’s one tip that millionaires swear by, and it’s the truest way to avoid financial disaster if/when other disaster comes along. No one is immune to emergencies or accidents – so it’s always always always better to be prepared.

If you’re interested but unsure and thinking, “But, what IS an emergency fund?? How can I possibly afford one? How much money should be in mine????” no worries – we’re breaking it down today with the help of some tips from the credit repair leaders at Lexington Law. (Be sure to pin this post for later reference, too!)

What's an EMERGENCY FUND? (+ How much should be in yours?) - with Lexington Law on Coming Up Roses

First thing’s first: an emergency fund is money specifically and exclusively set aside in case of emergency. It’s not play money, it’s not touchable if you’re strapped for cash – it’s FOR. EMERGENCIES. ONLY. And not having the perfect shoes for Friday night doesn’t count as an emergency, in case your mind went there. 😉 Now, I get it – so many of us aren’t swimming in bathtubs of Benjamins, and budgets may be tight. The LAST worry we have is what to do with extra cash floating around – we’re moreso worried about having enough cash to go around, from bills to student loans to groceries. Life ain’t cheap! But, an emergency fund is truly important, for bigger picture reasons that can impact other things you’re not necessarily thinking of in the moment. So let’s think about them now, shall we? First up…

Why you need an emergency fund:

  • NOT having savings can increase debt (which impacts, well, everything else). This article from Lexington Law was SO eye-opening; it presents studies from the Federal Reserve of New York and Amino which found that 3 out of 10 people felt they might need BUT wouldn’t have the money for something like a $2,000 emergency expense – like a home repair, ER visit, root canal, or trip to the vet.  Also, 37% of folks polled said they would be in debt if they incurred a medical expense of $100+. This all comes back to debt, because going into debt by putting emergencies onto a credit card (instead of utilizing something like an emergency fund) can hurt your credit score by up to 100 points could mean you’re just racking up debt that you can’t readily pay off, which if you’re maximizing your credit utilization ratio and maxing out credit cards in the process.
  • Not having savings can also increase the likelihood of making late payments, which ALSO bears risk of negatively impacting your credit score. It’s like the gateway drug to bad financial decisions all around that can wreak such worse havoc down the road if you’re not intentional wherever humanly possible and making hard, disciplined decisions as you go. Small steps are better than no steps if they’re in the right direction!
  • Like we said, you never know when you’ll need it. Emergencies, accidents, what have you…they’re not in the same category of financial planning that you review with your family accountant or in your spreadsheet at home. And emergencies where you’d need to pull from an emergency fund are never the GOOD kind. It’s never, “Hey honey, EMERGENCY – we just won the lottery!” It’s more like, “Honey, emergency…our roof is leaking.” You’ll have more luck playing your cards right from the start than you would playing the lotto if your hope is to have enough bucks in the bank if/when emergency strikes. Always air on the side of caution and put in extra whenever + wherever possible, never underestimating its value. Your emergency could be $150 or $15,000 – whichever the case, you don’t want it crippling your family or your credit down the road.


How to start an emergency fund:

  • Make a plan. First thing’s first, you need to go where you’re going to be able to map out your path to get there! Do you want/need three months worth of expenses saved in case? Six months? A year? What’s realistic given your current income, expenses, and potential liabilities?
  • Count it out. If you’re new to saving for emergencies, you’ll want to start by getting accustomed to counting. This was a big tip in our past budgeting posts here, too, so revisit those if you want/need the refresher! We’ve talked about this before, but Lexington Law agrees – download a savings and tracking app like Mint or Spendbook to literally visualize your expenses. This can help put your weeks into better perspective, allowing you room to make decisions on where you might be able to cut back and/or readjust spending to allow for more saving.
  • Separate the account. Make sure your emergency fund is in separate spot than where you pull for other, regular expenses. If it’s touchable, it’s forgetable and you don’t want to accidentally forget that it’s meant for emergencies only!
  • Cut ONE unnecessary expense. This is a GREAT tip from the credit repair leaders at Lexington Law, too; they suggest choosing just one editable expense and taking it out of the budget. (Editable meaning not your water bill or student loans, but maybe how much you spend on going out to eat each month, or the size of your shoe allowance 😉 ).
  • Better utilize credit repair. If your credit IS repaired, it can mean lower interest rates, less fees – even rewards. While you’re never guaranteed free money in the credit repair process, you may be eligible for funds back if you’ve been victim to things like identity theft, student debt, medical debt, divorce, or military leave and your credit has been negatively affected by it. Call a credit consultant at Lexington Law or sign up online for a credit report consultation to see if credit repair is the best next step in your own credit journey! Sign up for a Lexinton Law credit report consultation here! 
  • Do a No-Spend challenge. Especially if you’re looking for some extra dollars to kickstart your first emergency fund, collecting any + every usable bill will help!
  • Break it down by your age. This article from Lexington Law breaks it down by the decade, which can be so helpful in better knowing what to prioritize now versus later. Hint for anyone in their 20’s: your goal should be to get your emergency fund fully loaded now for later! In your 30’s, your emergency fund should grow proportionately to your expenses, etc.
  • Once you’re at a place where you can, make contributions into your emergency fund automatic. If even a small amount can go in with every paycheck, just like you might be already doing into your savings account or 401K, it can become routine and less daunting.

Do you have an emergency fund?

If you have any other helpful emergency fund related tips that I didn’t mention above, drop ’em in a comment below for all to see!


*Thanks to Lexington Law, a brand I lovelovelove, for sponsoring this post. As always, all opinions + thoughts presented are entirely my own. Thank YOU for supporting the brands that support Coming Up Roses!

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