I have the benefit of going to fitness fairs all around the state, and today I wrapped up number 15 of 16. One of the parts of the exercise is throwing the high school students a "curve ball" in their budget. Now, it could be positive or negative, but each time something happens, it affects their monthly salary. The negative ones tend to stick in my mind more, and off the top of my head, I know that we have broken arms, deaths in the family and transmissions dying. They all put a hindrance on life, and they all require money. I never really thought about having an emergency fund, mostly because I don't have a ton of money to put aside for each month. Unfortunately, I had an emergency yesterday and got to experience the wonders of unexpected expenses first hand. Long story short, I had a cup of sugary hot coffee spill on top of my computer and fry the logic board. Thankfully, my hard drive is alive, but the rest of it has gone to a better place...Mac heaven.
In moments of unpleasantness where something happens, emergency funds can help alleviate the pain of debt and also ensure that you may not have to go through long payments and build up interest on credit cards. They help in case of extreme emergencies for those of us who have no health insurance and can help fix a car when something goes awry. Take it from me, especially with cars, you never know what may break on it, or when it may completely die and go to the magical speedway in the sky. Rather than taking out a loan or charging an expense to a credit card, emergency funds are there for a buffer in case something overly expensive comes your way.
So how much should your emergency fund be? Well, some people say somewhere between 3-6 months worth of pay, just to be safe. If you really do a number on your body and are out of commission for a while, you may have to have a month or two off from work. Having an emergency fund can help you through a time of no work. Now, let's come back to reality and realize that most of us can't afford to set aside that much money for an emergency fund. I try to have one thousand dollars at my disposal at any given time, just to be safe. I feel like that is enough for me at the moment. Once I am married and have kids, I'm sure that number will increase, but for now, I'm safe!
Check out getrichslowly.org to find out more about emergency funds and why they are helpful. You never know when then unexpected may come and punch you in the face (figuratively...or literally).
Do you have an emergency fund established?