You Need an Emergency Fund (How to Get Started!)

Emergencies are a fact of life. When faced with an unexpected event—from a broken bone to a job layoff—it’s good to be prepared. Nothing new there, I’m sure. We know what we should do. It’s actually doing it that eludes so many.

Meet Mitch and Jenn

Several years ago, Mitch and Jenn had a string of bad luck. Mitch broke his leg in a skiing accident, Jenn’s car broke down, requiring major repairs and their home’s aged roof failed right in the middle of a major winter storm.

The timing for all of this wasn’t ideal—four weeks before Christmas. The financial and emotional toll of these events continues to be huge. Still, nothing like it might have been if they hadn’t been diligently building their Contingency Fund, more commonly known as an emergency fund.

Safety net

Fortunately, our friends were prepared. They’d saved up over many years and marked that money as their Contingency Fund. Suddenly that money became their safety net, a lifesaver when they felt like they’d fallen into the deep end of the ocean.

Mitch’s health insurance covered most of his surgery and follow-up therapy costs. Still, they had to come up with more than $2,400 to cover his deductible, co-pays, and prescriptions. The car repairs were just shy of $2,700—not surprising given the car’s age and 140,000 miles. He had some sick pay accrued with his employer, but that didn’t come near to covering the six weeks he was off work.

It was the roof that really threw them for a loop. The estimate to repair it—with no assurance that said repairs would last for longer than a few months—was $750, with a new roof coming in at an estimated $12,000.

Contingency Fund

Suddenly, their healthy $18,000 Contingency Fund didn’t look quite as massive as it had only days earlier. All of these financial emergencies were of top priority. None could be ignored.

The medical bills and car repairs reduced Mitch and Jenn’s CF to about $12,500. They opted for the roof repair of $750 to buy themselves time to save for a new roof.

The roof repairs held longer than three years. They had time to get additional estimates, which got the price down closer to $10,000, which given the circumstances, came as good news.

Mitch and Jenn went into crash-saving mode so that when they did replace the roof, the cost did not deplete their Contingency Fund.

Reasons a-plenty

I’m going to predict what the majority of my readers are thinking about now:

Sure, Mitch and Jenn are wealthy, so of course, they have money to save. Or, they’re lucky because they have two incomes; we have only one. Or, must be nice, but what about those of us who are unemployed, unhealthy, deeply in debt, or [insert excuse of choice here]?

As long as you see building your own Contingency Fund as optional, there will always be something more pressing to take priority. And, by the way, Mitch and Jenn are anything but wealthy. They’ve embraced frugality as a top priority in their lives, caring well for every dollar that comes into their lives, putting savings as a top priority.

Need specific reasons to grow your CF? Here they are. Learn them well, then believe with all your heart that something on this list is coming your way:


I am not an advocate of running to the doctor for every little thing. But when you or someone in your family is seriously ill,  involved in an accident, or contracts a horrible disease—you need to be prepared. Insurance only goes so far these days. A credit card account does not a Contingency Fund make.

The dreaded pink slip

Getting laid off from a job is never fun. It will be shocking when it comes out of the blue with no warning or two weeks’ notice. You need a way to pay your bills until you get another job.

A job with distance

Your next job may be four states away. Moving will not be cheap. You may have to cover those expenses, at least in part. The last thing you want is for that new job to sink you further into debt.

Serious breakdown

Sure, you can ignore all the warning signs of impending car trouble, but you’ll have a problem when your car gives up and breaks down. If you think auto maintenance is expensive, wait until you see the cost of repairs.


Natural disasters—who knows what form this type of emergency will take? No place on earth is immune from natural disasters, many of which come without much warning. That’s why you must have money stashed away, just in case.

Final call

Who wants to plan ahead for mourning? Not me. But knowing I have money stashed in my CF for when bereavement requires travel and more means that I don’t have to think about it now. I’m prepared.

Just do it

I understand that these days the cost of just about everything is soaring. These are tough times to find money to save. But do you really have any options? If your current lifestyle is sucking up every last dollar of your income, thereby putting you and your family at risk, it’s time to make changes.

Start small

While you need a big healthy Contingency Fund, that will not happen overnight. Your goal is to have the amount required to pay all the bills and keep food on the table for six months without any paychecks. One-half of your annual net income is huge when you consider it sitting in a savings account. But don’t focus on that number.

Instead, start by saving $500. Then reset your goal to $1,000. Now you’re on your way. You’re catching the savings bug. Soon you will reach $2,500. Then, $5,000 will be in view, and you’ll be on your way.

That’s the way to do it. But you’ll never reach your goal until you get that first $500 safely tucked away in a savings account.




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