To The Rescue Again: The Importance Of An Emergency Fund.

Once again, and emergency fund helps someone through 4 months of unemployment. If you have been putting off adding to your fund, let this story be a lesson to you – back in July of 2007 my brother was laid off, and I wrote about how important his emergency fund was in helping him weather unemployment. Because he had a sizable amount of money set aside, he made it through a few months with no problems. Fast forward a year and a half, and my brother was laid off again in January – and just yesterday accepted a new position with another firm. So he had to provide for himself for another 4.5 months, and thankfully he had built up his emergency fund yet again. He was still able to pay his mortgage, his car loan, his monthly bills, and put food on his plate, even without working for that long. He didn’t need to charge up credit card debt or take out any loans because he planned in advance…something too many of us don’t do enough of.

Even if you are only able to put aside a tiny amount of money every month towards an emergency fund, start doing it NOW. Every dollar you put away is one less dollar you need to borrow or charge to a credit card should an emergency arise. With the economy the way it is, no one is immune to the possibility of losing their jobs; it could happen to anyone, at anytime, in any community. Even for people like myself who are self-employed, income is down on a monthly basis and emergency funds might come into play. So be sure to start putting something aside for that rainy day – take it from my brother who had to use his fund to live on twice in the last 2 years!

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Comments (7)

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  1. moneymonk says:

    Most people don’t think about saving when they are working, why? well because they are already working, the problem we spend when are good and we just decrease spending when they are bad. Most of the time we don’t save when times are good or bad.

    He did what about 20% of people do

  2. Craig says:

    There are a lot of expenses people have and setting up a side emergency fund is not a very important matter for most since they have other things they need money for. But if the situation arises, it’s a nice security blanket.

  3. Amanda says:

    I often get confused between the difference in an emergency fund and a savings account – for instance, I save HEAPS of money (at least 80% of my income, but I’m still living at home as I’m a postgrad student though I work two part-time jobs), but it all goes into a high-interest savings account, rather than a separate “emergency fund”. Would the two basically be the same thing?

  4. david says:

    In your case, yes, I would imagine so.

  5. Tina says:

    I get depressed when looking at other people’s savings… I started saving for an emergency at the beginning of the year. But being a solo income makes it tough. I’ve managed to save $500.00 in 4 months but it doesn’t feel like enough. Any suggestions on how to save more?

  6. Tina says:

    You know if I would have just read below the article I would have seen some suggestions! LOL

  7. MoneyEnergy says:

    Amazing, that he (1) was so disciplined as to really save up the full 4 months of unemployment emergency funds and (2) that he actually needed to draw on it, and never needed to take on new debt, and (3) that he saved it all up again and needed it again! What a story and great example for the rest of us. You’re right, even every little bit you can save up helps.