This “ Do You Do You Need An Emergency Fund? Yes You Do “ posts explains the reasons that you are better of with emergency funds regardless of the situations you are in or where you are in your life. 

I am in a different place now, literally. I’m currently visiting my family in North Carolina whom I have not seen in 2 months. It’s only 2 months but it seems like it has been forever.

It took me 5 hours to drive from Maryland to North Carolina. Of course, I was with my wife and my daughter, so, I had to stop from time to time.

Every time I drive, I like my radio to be turned off. But this time, it was different because my wife got tired of me singing the same Filipino songs over and over again. So, I turned on the radio and started listening to some music.

And, then, I found myself listening to a radio segment where listeners can ask for advice regarding their situation. There was this lady who expressed her feelings about her financial dilemma. She has been unable to pay her medical bills and she doesn’t have enough money to pay her day-to-day bills.

I felt she was crying when she was telling her story. But she was holding back.

I didn’t get the whole story because I started listening when the conversation had gone for a few minutes. While I was driving, I couldn’t help but wonder about how many people are in the same position as she is.

Out of curiosity, I looked up any statistics on people who are unable to meet their unforeseen expenses. According to a study, 62% of Americans are not able to pay their unexpected expenses. This is really a shocking fact to me.

I have been in situations where I or my family didn’t have emergency funds and couldn’t afford to even meet our own basic necessities. Being in those situations is never for the faint of heart. Being there can make you question your life, what you’ve done wrong to be in those situations, etc.

Having a safety net is necessary for me and my family. This means that we need an emergency fund.

Reasons You Need an Emergency Fund

As someone who has been in such position in the past, I can attest the benefits and the necessity of having an emergency fund stashed for unforeseen and unexpected expenses.

1. No one can help you but yourself

Your family and friends will always be there. But what if they are not able to help you because they have financial problems they need to attend to. You may find that nobody can help you. When all of the people you know can only mind their own business for now, the only person you can rely on is yourself. It is in your best interest to keep a stash of money for rainy days.

2. No lenders can extend credit to you

Lenders may not be able extend you credit if you have a credit history or credit score that does not meet their requirements. If you happen to need funds and your identity has been stolen, at the same time, lenders may not provide you credit until your identity has been straightened.

3. You lose your job

In this economy, a number of companies will cut jobs to survive and stay afloat. If you get laid off, are you guaranteed to have money to pay your bills until you find another job? Can you say that you can easily find a job? Hopefully, your answer is yes if you don’t have an emergency fund. But as always, the odds are against you when it comes to finding job in a marketplace filled with unemployed, highly qualified professionals.

4. You encounter life changing events

These life changing events include pregnancy, adoption, illness, among others. Are you prepared to meet the financial demands of these events? If you have, then, I would assume you have either good insurance coverage or emergency fund stashed somewhere. If, not, then you will find yourself trying to find ways to meet the needs of these events faster than when you should (just in case these events come sooner than expected).

5. Your means of transportation is not reliable

Car costs a lot. From the time you buy a car to the time you dispose it, you will need to shell out money on car. In between the buying and disposing stages, there is maintaining stage. You are required to maintain your car to prevent you from solving car problems that can easily destroy it and increase your chances of buying another one. Do you have money to pay for these car repairs? You need an emergency fund to cover these repair costs.

6. Your child needs are unpredictable

I have a daughter and her needs are constantly changing. Whether it’s medical or physical or something else, her needs are constantly in motion and changing without notice. This means that my wife and I have to satisfy her needs. A lot of parents can agree with me when I say, raising a child is worth it but it can be expensive, at the same time. Do you have funds to meet your kid’s needs? You need an emergency fund for things like this. If you have other sources of funds for meeting your child’s needs, then, it’s good to use those instead of the emergency fund.

7. Your relative passes away

I’m including this because I have been in these kinds of situation quite often. It’s saddening but it’s reality. I have relatives in the Philippines and elsewhere in the US. When my brother who lived in the Philippines died a couple of years ago, I had to go home. When my brother-in-law in NC died a couple of months ago, I had to go home, too. I have an extended family. In cases like this I need an emergency fund so I can be there physically for my family. Travelling costs can be quite expensive.

8. Your prescription is not covered

You have a health insurance. Having said that, some prescriptions are not covered by your insurance company. If you are prescribed by medications not covered by your carrier, you may need to pay out-of-pocket. Medicines are not cheap and can cost hundreds of dollars. Do you have money to pay for these medicines? Remember, these medicines can and will save your life and you need these. If you aren’t prepared for these expenses, what would you do? Your emergency fund can go a long way.

9. You have been divorced

Though unfortunate and saddening, the reality is some marriages don’t last long. What’s worst is the financial battles between the spouses. If you happen to be stuck with paying all the bills (i.e. from lawyer fees to mortgage), you may be looking at paying thousands of dollars. If you have not saved enough, how would you handle this type of situation? Having emergency funds can sometimes solve or alleviate the problems while you are looking for better ways to solve them.

10. You moved to another place

So, you got a new job, that is, a better paying one. You need to move but your new company won’t be paying the relocation expenses. How are you going to pay for these? You can always use your credit cards. But if you don’t have a credit line sufficient to address these relocation expenses, how would you pay for them? Your emergency funds can help you pay for these. You just have to replenish them once you start getting paid on your new job.

11. You have become disabled

So catastrophe happens and you become disabled. Next thing you know is that you cannot work temporarily. If you have a temporary disability insurance, then, you may be able to cover your immediate bills or needs. But what if you don’t have insurance and your company doesn’t have disability benefits. Can you honestly say that you can financially survive? Your emergency funds can cover the expenses as a result of you not having a stream of income because of your disability.

12. Your work hours have been cut

You are still fortunate if your company decides to just cut your hours and not let you go permanently. At least this way, you are still earning money though not a whole a lot. If this happens to you, how are able to meet your bills. You can’t say to your bill collectors that you will only pay them half. That’s not how the business goes. You can make payment arrangement in the interim but it can only extend to several months and not for a very long time. Your emergency funds can support the income you have lost and pay for any bills you have.

13. Your kids need money

Your kids are all grown up but you may need an emergency fund for them. They have their own lives. But suddenly, they find themselves needing money? They can’t go to anybody because nobody can extend help to them. As a parent, you will always be there to rescue your kids. I know my wife and I would because that’s how we were raised. I may not speak for everybody but my and my wife’s obligations to our kid far extend to college expenses. My kid will always be our kid and we will always be there to support her. Emergency funds can fill the need gap until your kids can stand on their own. Plus, they can always give your money back but that’s not a guarantee.


Have I convinced you that you need an emergency fund? Having an emergency fund can lessen the burden and pressure you have when all the bills are coming in and you need to pay them regardless of where you are in your life or what you have or don’t have. It’s always better to prepare than to figure out the solutions when the problems are already right in front of you.



83 thoughts on “Do You Need An Emergency Fund? Yes You Do”

  1. Having an emergency fund is something my girlfriend and myself have struggled with for a few years. We have been aggressive in trying to maximize our tax deferred retirement accounts, often at the expense of a healthy cash buffer.

    You list out many great reasons and I just had an encounter with number 8. Our cat needed something from the Vet for $600 but it wasn’t covered by our insurance policy. Luckily, it wasn’t anything serious so we can either choose to not have it or we could save up for it.

    As for disability insurance, I would recommend everyone check out the few large brokers who sell this individually outside of their employers. For me, I have supplemental disability insurance that when combined with my employer’s benefit of basic disability insurance, means I will be 100% covered in case I’m unable to work for a short period of time. The cost of the additional insurance was less than $20 per month and the psychological impact of knowing everything will be okay has been well worth it.

    The same goes for renters or homeowners insurance. A friend of mine had a small fire next door and it ultimately destroyed all of her work clothes. She had to replace her entire wardrobe, including shoes, belts, coats, etc. Renter’s insurance would have helped, but hindsight is 20/20.

    Another benefit with a cash buffer is the immediate emotional impact it has. When our cash buffer is higher, we worry less and feel more secure.

    After reading this list, my resolve to reinforce our cash buffer has gone up. Thanks Allan for taking the time to put this post together!
    Distilled Dollar recently posted…Four Phases of Financial IndependenceMy Profile

    1. Thanks for reading.

      I’ve been in situations before when I didn’t have emergency fund. It’s something that I don’t want to be subjected in the future. I felt bad for the lady who didn’t have enough and I related with her situation.

      I thought that in this post, I am able to share what I thought and what I have gone and have done about emergency fund.

    2. My day job is as a veterinarian. One of the most heartbreaking things about my job is watching people boil a decision about their beloved pet down to whether or not they have the money. That’s one of the main reasons I’m blogging about personal finance–insurance is one thing, but the self-insurance and peace of mind that comes from having a healthy emergency fund has so many benefits.

  2. Great reminders as to the importance of an emergency fund. I feel that this is often the most neglected and undervalued step for people when they start saving. People naturally suffer from Optimism Bias and think, “That won’t happen to me.” It is important to insure yourself for when it does!
    Larry Green recently posted…Save Money Without A BudgetMy Profile

    1. I’ve seen a lot of people with that kind of mentality. I think there’s a reason that emergency is called emergency. We cannot predict if or when something happens. In this case, it is always good to be prepared.

  3. The answer to that question is obviously YES! It always amazes me that there are some many people out there that fail to have a few thousands saved for emergencies. When living from paychack-2-paycheck, it would need some serious effort to do this.
    I am gratefull we have ours

    1. I believe everybody should have an emergency fund. It is guaranteed we will need to pay for something out of ordinary, whether is medical related or problems with the house or something else. It’s always good to have that emergency fund.

  4. I do agree with you, but feel that if you have revolving credit (the expensive stuff) that paying that off first might be a suggestible alternative. Any thing that saps your cash flow most should be eliminated first in all circumstances. I would not build up an emergency fund if I still had a 18% plus credit balance outstanding. Pay off non-deductible debt first, making highest interest rate debt the priority, Also, stop racking up debt if you can not afford an emergency fund (you have no business going there if that is the case).

  5. Its so timely for me to read this post. my husband and I just finished fully funding our emergency fund. It has been such a great relief to just get that out of the way and not have to worry about it. because we don’t have any kids yet and are relatively healthly, I think our biggested unexpected expense might be a job loss, or major car repair. Totally agree, an emergency fund is so important

  6. So true! I am a planner, and my parents were careful to instill values of being responsible with money and the importance of saving. You never know what might happen. I am a newlywed (less than a year) and my husband is in the army about to be deployed with the National Guard. When he gets back, he has 2 years of his contract left with the Guard before he can go active so will have to find a job – civilian or full time with the Guard -during that time. He has been working full time with the Guard but the position is 9 month, and the other position he had is where we live now and we will be moving. I am finishing a master’s degree and will be looking for a job in the new place as well. We live on about 50% of our income and are trying to build up a safety net as best we can.
    Erin Winters recently posted…EXPECTATIONS AND CONTENTMENTMy Profile

  7. Since Im young still I didn’t know about this whole thing. But this could be really helpful in the future. I love when people share and help to each other. 62% is big number, people must consider this. Thanks for sharing

  8. I love your blog. Its so hellful and easy to follow. This article is so true. You never know what’s around the corner. I read this title from a travel perspective but reading this really brought me back to reality.

  9. after reading your post i think that i must have an emergency fund. its very important for hard time in our life.. Great idea thanks <3

  10. Great post here Allan. I can definitely relate and this is something people need to prepare for. Life will always throw the unexpected. It’s way easier to adapt to different scenarios and situations if we’re prepared.

    Life is very different these days and if we’re not geared properly, it will be nothing but a huge struggle.

    It’s definitely sad and alarming knowing how many people out there are just struggling their way through life.

    I definitely have emergency funds. I’m not really a huge spender and I do practice asset allocation which is definitely extremely important.

    Thanks for sharing this Allan.
    Pete Zafra recently posted…How To Maintain A Positive Attitude: 6 Powerful Techniques To Keep Your Head Up When Life Tries To Force It DownMy Profile

  11. We just had our car malfunction and had to shell out a ridiculous amount of cash! Luckily I’m a firm believer in the emergency fund. Even if it kills me to hand over :\

  12. I need to start saving for my emergency bad really. I have read a lot of things like this before but I always procrastinate. The perfect time is really now.

    1. Yes. Emergency funds can take away some worries on you when emergency situations do arise.

  13. Think this is a really pertinent post, Allan. People’s situations can change in a flash, and those times can often be stressful enough, with having to factor in worries about money. My Mum always used to say you should have ‘running money’ which sounds slightly negative I know, but the thought behind it is the same!

    1. Yes, situations can change and it’s always best to have an emergency fund in place.

  14. I totally agree, you never know when you will be in an emergency situation so it’s always good to have it!

    1. Yes. You can never prepare for the unknowns. This doesn’t mean that you shouldn’t save for emergency purposes. It is to your best interest to always set aside fund so you can have a buffer when emergency situations do arise.

  15. A really interesting blog post. I have also tried the calculator. If you will retire, let’s say at about 66, will all to savings really be worth it? I currently spend everything on travel, but I am aware that savings are also a must.
    Marie recently posted…How To Spend A Day Out In YorkMy Profile

    1. I think the key is balance. Too much saving is bad and too much spending is also bad. A balance in-between is good.

  16. It’s so easy to not think about the future when you’re young. I’m only 21 and I’m still trying to put everything together financially. I find it quite challenging but I found your post really useful for the future. Thank you!

    1. Thank you. Just please remember that any small amount can make a big difference in the future.

  17. Thanks for sharing this! I’m new(er) to this blogging thing and am hoping to include some posts about healthy, responsible family finances down the road. If you are every interested in guest posting, let me know! You have great things to share.

    1. Thanks. I am open to guest posting as well. You can always send me a message when you have a free time.

  18. I guess the realization of a need for the emergency fund comes with responsibility or after the first case when you wish you had one. These are great points of why you should do it before something happens. It’s better to have it and never have a need to use it then to find yourself struggling without it.
    Thanks for a great post!

    1. Yes. I’ve been situations like this before. It wasn’t my fault because I was a young kid back then. But I learned early on in life the value of having an emergency fund.

  19. I’m trying to get one of these in place now just in case phone/laptop etc break as for me those are expensive purchases that are essential. This has inspired me to save even more!

    1. Thank you. There are things in this world that we can’t control. The ones that we can control is funding our emergency fund account. Any small amount put in the account can make a difference.

  20. I absolutely agree! If I didn’t have an emergency fund, I wouldn’t have been able to replace our hot water heater when it decided to bust a few years ago. It saved us so much by having that buffer. We also didn’t have to worry about finding the money, because it was sitting there growing and waiting for us when we needed it.

    1. Yes, finding the money should be the least of the problems when emergency situation happen. Emergency funds can take away some of the worries when bad situations do occur.

    1. We’ll never know what will happen tomorrow or the next day. It’s always a good idea to to have an emergency fund to make sure that when unexpected situations arise, then, we have something to use for.

  21. Yes, Yes, Yes! It’s SO important to have an emergency fund. Chances are you will need it at some point or another.

    1. No one is immune to emergency. We all go through emergencies in our lives. It is necessary to create a fund dedicated to financing these emergencies.

  22. Great post, Kabayan! I totally agree on your points, especially on the number 1. Here in our country, even though you gave help to your family or friends there are times that they won’t give back when it’s your turn na. And that’s frustrating. That’s why me and my hubby make sure we have emergency funds. Of course, we don’t know when sickness will come or accidents happen.

    1. Salamat, Kabayan. That’s true with our culture and tradition. In short, the best person you can rely on is yourself and then your loving significant other. Like what you said sickness or accident is unknown. That is why need to save as much as we can so we can have something to fork out when that unknown time comes.

  23. I either saw that statistic or something similar. I actually wasn’t shocked, but was saddened. There is so much work left to do in the personal finance space…so many need help. It starts with financial literacy and practical advice.

  24. We are currently working on building up are Savings fund! It is taking a little longer than we hoped but we are getting there. Considering we have had emergencies lately then it completely makes sense to prepare for a rainy day!

    1. That is so good to hear. I believe that it’s always better to have such fund. This way, when rainy days come, you have something to use. I admire people who always attempt to get ahead of the situations before they happen.

  25. I try to keep a couple thousand dollars in savings just as a just incase. You never know what could happen. I think about this often though, it makes me sad. It’s a stress that can be eliminated by a little planning.

    1. We’ll never know when the emergency comes but we can always prepare as much as we can.

  26. I’ve been trying to drill this concept in my brain for a long time now! I have such trouble keeping my emergency fund (usually because an emergency happens) and it’s a bummer!

  27. Regardless of your reasons everyone needs an emergency fund. I know first hand how great it is to have one when you need one. Thank you so much for this it helps because it highlights real specific events that might take place.

  28. This is so true! I need breaks and can’t even afford them. It is really embarrassing and I wish I would learn to handle my money better! It just seems impossible!

  29. This is SO true and such GOOD information. My husband and I are currently doing Dave Ramey’s plan and find it so easy to follow

  30. This is very true! It’s hard to “pay yourself first,” but it’s so necessary. Otherwise credit card debt is sure to follow! Thanks for the info (and motivation to pick back up on the savings!)

    1. Yes. It is really necessary to pay yourself first before others. It’s something that I learned early on in life.

  31. Love this article! My husband and I started an emergency fund when we first got married and it’s been a life saver because we have had to dip into several times and then rebuild it back up. I can’t imagine what we would have done if we didn’t have it!

    1. It’s hard to deal with situations when you don’t have money to begin with. I’ve been there and done that and don’t want to ever go back there. Thanks for reading my post.

  32. This is something I’ve been slowly working on, but it ain’t easy. I am no good at money management 🙁 We are slightly in debt, but now that I run my own business we are seeing it shrink!

    1. Little by little things will get better. Next thing you know you guys are free from debt.

  33. I agree with having an emergency fund, but until you have all your debt paid off, there really is no way to do this. It’s depressing to think about.

    Paying off 40K in three years is impressive.

    What do you suggest for those who don’t have a fund and don’t have extra funds to put away?

    Did you create your emergency fund before (during) or after your 40K was paid off?

    1. I did both at the same time. While I was saving, I was paying my debt off. What I did was I found some side hustles and worked with the credit card companies regarding payment arrangements. Most of my day-job income went to savings and a portion went to debt. The income I got from my side hustles was the one that I used to pay all my debts.

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