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.

An emergency fund, what we call our Contingency Fund, is a stash of money set aside for protection during the financial storms life throws our way—events that can be stressful and costly.

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 decided to fail 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, but 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 the costs of his surgery and follow-up therapy. 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 cover 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 3 years. They had time to get additional estimatesm, 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. When it comes out of the blue with no warning or two-weeks notice, it will be shocking. 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. Those are expenses you may have to cover yourself, 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 when your car gives up and breaks down, you’ll have a problem. 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? There is no place on earth immune from natural disaster, many of which come without much warning. That’s why you need to 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’s not going to 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 a huge number when you think of 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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6 replies
  1. Mary West says:

    I don’t even have any plastic. Being in debt is terrible. You might as well be in jail. If we can’t pay for it up front, we don’t buy it. It’s not worth going into debt again. Been there done that. Never again.

    • Cathy down on the farm... says:

      Noelle, if you are talking about in your home, my dad used to store his in a little fireproof safe under the basement steps., at the very top step, on a little shelf. I have read up on it and it seems the first place a thief would go is the Master Bedroom. If you have a deep freezer in a basement, you could bury it at the bottom of the deep freezer. My parents used to do that, as well. Personally I have thought of my cold air ducts in my house to put it but it is important that you have a fire proof safe or container. I am sure Mary has many more great suggestions than I do. Never bury cash out side in the ground as I have read many have done, and they have returned to see their money has gone back to the dirt in which it came from.

    • Mary Hunt says:

      In a bank or credit union. Check out SmartyPig. It’s a super fun way you can save with an online account. But it’s more than that. Great fun that will definitely empower you to save! Storing money at home is risking because it is not safe FROM YOU! It’s way too handy; to easy to dip into it now and then.

  2. Cathy down on the farm... says:

    Thank you. Great common sense, Mary. We just received our little stimulus check and you can bet I am not buying a big screen t.v. with it Am going to save it back to pay part of my property taxes that will be due in April. My husband and I sat down and I said, where can we save? We went through all of our bills and many things we didn’t even know we were paying for, if you can believe that! We came up with a $1,500.00 dollars savings per MONTH! How did that happen? Check your expenses often. You may be amazed at what you find! Sometimes even hidden things that companies try to slip into your bills that you can contest!

  3. Fran says:

    This story was us! Still in the midst of it. The day before Thanksgiving we had our annual furnace check up and they found a cracked heat exchanger, which would have been leaking CO very soon, if it wasn’t already. Our CO detectors had not detected anything yet, and we thanked our lucky stars we had decided on a furnace review that year (it was 15 yrs old). Stopped using it that day and got by with space heaters for the last week of Nov until installers could fit us in.
    New furnace and matching AC (also 15yo): $12,000. Out of pocket, not an insurance covered item.

    As that was happening, we noticed something different about the wood floor near the dishwasher. Called a tech. Yep, slow leak, going on for some time, mostly out of view under cabinets, section of floor destroyed, mold growth, etc. DW removed and disposed of (7 yrs old), section of cabinets removed, damaged floor torn up, dried out. Now we’re in the waiting period to get on the schedule of the various contractors who will put it all back together, and they are all busy. Insurance adjuster estimated more than $10,000 damage, with a $1000 deductible.
    Still, I consider ourselves lucky. We are a one income family and live frugally, and have contributed to an emergency fund for years. As painful as it is to write the checks, it is necessary, and we do have enough to cover all of it, and still have a healthy amount left over.
    I know not everyone is in this position, but we worked hard to be here, started saving early and kept at it no matter what, it was a priority. That allowed us to pay these large expenses without a problem. I urge everyone I know to set aside money for the unexpected. It is a huge relief to be able to pay for things in the midst of the stress.


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