Never Be Without an Emergency Fund

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Squirrels do something funny in the fall, they collect up acorns and seeds for the winter. They know that the pickings will be slim come the snow and so they save up now to help them weather the leaner times. While we can’t time emergencies as well as squirrels can time winter, we have to know that emergencies lurk around every corner. Whether it’s the loss of a job, a car accident, or just an emergency trip to the hospital for a deep cut – we know emergencies happen.

That’s why a quote like this surprised me about the recent furloughing of FAA workers (which ended earlier this month):

“It really is scary,” said Michael MacDonald, a 54-year-old Federal Aviation Administration engineer who lives outside of Boston. “For one week, you think OK, we can handle one week. But now the reality is starting to set in — this is going to take six weeks or more.”

This underscores the importance of an emergency fund. The classic “emergency” we always think of is when you lose your job. In these last few years, we’ve seen unemployment figures stay much higher than we’ve seen in a long time. A lot of people are out of work and their prospects of finding work looks grim. We’ve had folks receiving unemployment for up to 99 weeks, nearly two years, and for those folks, an emergency fund is nice but it only softens an already heavy blow.

However, for folks like MacDonald, you weren’t fired. You were furloughed. If you had a six month emergency fund, which most folks consider the minimum, six weeks would be a concern but not something labeled “scary.” I don’t want to get too focused on an individual, everyone’s personal situation is different, but the reality is that this can happen to anyone. You can be furloughed, fired, whatever – but until you are, bolster up your emergency fund. (It’s not all bad, Steve Alexander is also quoted in the story and he’s saved up over a year).

Put it in an online savings account, adjust it as necessary, but just make sure you have something to help weather these circumstances (which, for FAA workers, wasn’t that much longer after the article – it ended early last week).

{ 14 comments, please add your thoughts now! }

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14 Responses to “Never Be Without an Emergency Fund”

  1. gharkness says:

    I believe the standard timeline for finding a new job is 1 month for every $10,000 in salary expected. For FAA – that could be a LOT of months, and therefore, there should have been a LOT of planning.

    My husband got laid off the day he returned to work after a fairly expensive vacation (hello, cruising!). While he was able to get a short-term contract within about two months, it took him several months before he was again “reliably” employed (whatever “reliable” means these days.)

    Not tooting my own horn, but due to excellent planning, we never really even noticed he was unemployed (financially speaking), and before he even got hired, we found ourselves needing another vehicle. So we bought one, and paid cash.

    Planning is good 🙂

  2. Brendan says:

    Hi there! I’ve been following this blog for awhile now, but this is my first comment.

    I think your example of an FAA worker shows the reason why EVERYBODY should have a 6 month (minimum) liquid emergency fund stashed away.
    As an FAA contractor myself, government jobs are considered the safest of the safe, so I think these workers feel they don’t need to ever worry about losing their income stream.

    This furlough proved that nobody is immune, and we should all have a padded emergency fund, seperate form our regular spending money (as you suggested).

    • Jim says:

      Brendan – thank you for sharing your experiences; I know “government” jobs have been considered safe but with all these austerity measures, it’s a little risky to rely on that.

  3. Wilma says:

    Saving is just plain hard to do. I read Dave Ramsey’s book and he says to save $1000 for your emergency fund as the first step in his plan. That is even hard to do. This economy is down right scary these days. I’ve always separated my change into jars for a small emergency type stash but my coin jar stashes just aren’t enough if some thing REALLY goes bad. Wonder if Warren would adopt me? Or hire me as his personal cook?

    • Ryan says:

      If you’re single, I could maybe see you having trouble saving up $1000, but this should be easily reachable if you’re married.

      Pay minimum payments on any debt you have and put the rest towards emergency fund.

      I think anyone could come up with $1000 for emergency fund within 3 months.

      And by anyone, I mean adults with jobs.

      • Wilma says:

        I am single and still struggle despite my frugalness. Was a single mom till 5 years ago when my son got married and moved on. My struggles to stay afloat have been many but I shall keep on keepin’ on in the frugal way. All my work will pay off at some point.

  4. says:

    Emergency funds are *so* important, I can’t stress them enough.

  5. Nate says:

    The emergency fund (or perhaps the college fund) could possibly be the most overlooked of any savings plan, but it is important. 6 months is the recommended minimum, but with the financial troubles the country’s facing right now, that might not even be sufficient. The fund is a necessity, even for the most cautious and frugal.

  6. It never ceases to amaze me how many smart people still live paycheck to paycheck without an emergency fund. I’m probably too conservative- I keep 24 months in reserve.

    • Shirley says:

      I’ve seen some ‘smart people’ devastated by unexpected crisis that simply wiped out what they thought were sufficient emergency funds. It’s better to have more than needed than not enough.

  7. Sandy Sachs says:

    There’s an old saying: Save something for the rainy day. Squirrels do exactly the same. Same values should be inculcated in the young minds, and should be taught not to squander away the hard earned money.

  8. dave says:

    You don’t need an emergency fund, instead use your cash to pay off credit card or mortgage debt and if you ever lose your job then you can always use credit cards or home loan

    • Strebkr says:

      What happens when you loose your job and you credit card limit gets hacked to nothing as it has happened lately to people?

      Credit should never be an emergency fund.

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