Building an Emergency Fund is Hard

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Photo by: Pawel Czerwinski

As the title states, building an emergency fund is hard.

Honestly, all of this personal finance stuff has been hard. I find that many people in my circle find it to be, too. That’s why I have this blog to help make it less hard.

If you aren’t taught about these habits at an early age, changing them when you’re an adult is hard! Not to mention, the rising costs of LITERALLY everything makes it so difficult to save.

But let’s pause my rant for a second and talk a little bit about what is an emergency fund.

What is an emergency fund?

An emergency fund (EF) is a sum of money you set aside for emergencies.

Emergency funds play a pivotal role in your finances. Having an emergency fund will allow you to use cash for unexpected expenses and not resort to debt (or fall further into debt if you already have some).

Here are some scenarios that people may classify as an emergency:

• Job loss
• Car repairs
• Essential home repair
• Pet gets sick
• Unexpected medical expenses

How much to save is up to you

Many personal finance experts recommend having about 3-6 months’ worth of expenses in your emergency fund.

There is no right answer. Factor in your job stability and the people/pets who rely on you for their income to find a number that makes you feel secure!

If you’re on a debt payoff journey, some recommend saving around $1,000 or a month’s worth of expenses before you start paying off your debt so you don’t go more into debt if something comes up.

*Savings hack: Sinking Funds! Click HERE to read more about them

Where should you keep your emergency fund?

Now, you can keep it wherever you want, but a high-yield savings account is a great place to put it!

High-yield savings accounts have about a 10-12x higher interest rate than a regular savings account. Your emergency fund can be earning more money while it’s just sitting there.

We have our emergency fund and other savings in Ally. I love their features because you can have different “buckets” all within one account for the various things you are saving for.

Here’s an example:

I am not an affiliate for Ally, I just really like how they set up the account. It has been so much easier for us to save and keep everything organized!

Our emergency fund goals

My goal for us this year was to have a $16,000 emergency fund, meaning this month we would have about $8,000.

The reality is that we have about $1,600. This is still a lot of money for us and many others. I don’t want to discount that. We are privileged to be able to save at all.

We have had little emergencies come up that have eaten into our fund and just inflation in general has made it difficult to save as much as I’d like us to.

I read a Reddit comment that said if you are having a hard time “getting ahead” in terms of your emergency fund because you keep needing to use it then you should congratulate yourself. Your emergency fund is doing what it’s intended to do!

Don’t be sad you can’t pile up your money, be happy that you have had the money to cover the emergency and didn’t have to use debt. I really liked that reframe and have been trying to remember that as we are building and using ours.

Focusing on building the habit

Even though our emergency fund isn’t where I’d like it to be, us building the habit of saving is still a huge win.

This time last year we were working hard paying off high-interest debt, and so we weren’t saving any extra money. It was all going to debt.

This year, I am appreciating that building our money foundations is just as important as seeing that number increase in our bank or investment accounts.

These habits are what will help us eventually reach our goals!

If you’re struggling to save, just try starting with a small amount each month. Even if you can only save or invest $5 a week or monthly, it helps you get into the routine of putting money aside and slowly watching your pot grow.

We all have to start somewhere!