A recent survey of more than 2,000 American adults found that only 27% of single people have an emergency fund. The study, conducted by TD Ameritrade, found that married couples are doing a little better—39% of them have an emergency fund. As of today, I’m one of the 73% of single people without any money set aside for an emergency, and I know that has to change. I don’t expect to be married anytime soon, so I can’t rely on anyone else’s income to help me get on the right track financially.
I live in Southern California, where earthquakes and wildfires are always a possibility. What would I do if something happened to my apartment and all of my possessions? Or what if I lose one of my main freelance gigs and I can’t cover the rent? My Smart car is running smoothly, but what if something goes wrong with it or I’m in a collision? What if my dog needs emergency surgery? Or what if I get seriously sick or injured, and I have to stop working for a while? I’m guessing in any of these cases, I’d either end up putting the bills on a credit card or setting up a Gofundme page and begging friends and strangers for donations. Neither of those ideas is appealing.
So far, I’ve dealt with potential emergencies with wishful thinking. I simply hope nothing will go wrong. Deep down inside, I know this isn’t good enough.
Not having an emergency fund weighs on me whenever I spend money on less important things. (“Do I need these shoes? Or should I try to save this money instead?”) In an effort to lower my stress level, I’ve started looking into what’s involved in setting up an emergency fund. Creating one—and regularly contributing to it—is on my list of goals for the upcoming year.
I don’t have an emergency fund, and I could end up paying the price—literally.
I used to think emergency funds were something only rich people could afford to have. I’m not exactly rolling in cash, so finding money to put aside won’t be easy. The more I read about this stuff, though, the more it seems like NOT having an emergency fund is the more costly option. In an emergency, it’s free to send up a Gofundme page, but I’d find it embarrassing to explain my financial woes on a public website. I also hate the idea of relying on other people’s generosity and their ability to give. That means, in an emergency, I could end up with unpaid bills—and angry creditors.
If an emergency situation leaves me struggling to pay my regular bills, I’ll also be racking up late fees. If an automatic payment tries to deduct money when my bank balance is too low to cover it, I’ll have to pay for overdrawing my account. Maybe I could withdraw money from a retirement account, but if I’m not able to pay it back quickly, I’ll have to pay extra charges for that, too. If I borrow from a friend or family member, and can’t immediately start making payments, it could affect our relationship. Basically, not having an emergency account only seems like the easy way to go. If something happens and I need money in a hurry, I could be completely screwing up my life.
So how do I set up an emergency fund?
Everything I’ve read online suggests setting up a separate account, instead of trying to build an emergency fund in your usual checking or savings account. Having a separate account make it easy to see exactly how much you’ve put aside for emergencies. It may also make it a little harder for you to access the money on a whim. I have an online bank account that I set up a few years ago and never really used. I’ve decided it’s the perfect place for an emergency fund. If I need money urgently, I can transfer it back to my regular bank account, but in the meantime, it’s kind of out of sight.
How much should I be setting aside?
Most people suggest setting aside enough money to cover three to six months of expenses. (This simple online calculator will do the math for you.) When I saw how much money the calculator said I should be putting aside, I panicked a little. It was a big number—bigger than anything I’ll be able to save in the foreseeable future. If your financial situation is anything like mine, don’t freak out over the goal amount. It’s OK if you can’t immediately put thousands of dollars in a special account. Just start putting aside what you can, even if it’s only $50 or $100 a paycheck (or less!). When it comes to emergency funds, ANYTHING is better than nothing.
What if I need that money for a non-emergency thing?
This is where self-control is important. Your emergency fund is for actual emergencies, and you’ll need to be very clear with yourself about what qualifies. Don’t treat it like a vacation fund, a new car fund, a Christmas shopping fund, a self-care fund—or anything else. Sometimes you might feel like you reeeeeally need a spa day, but having an emergency fund is a kind of self-care, too. (And you can always save for the nice-but-not-essential stuff in your regular savings account.) Life is full of expenses that matter, but if you pull from your emergency fund for non-emergencies, you could be putting your future self in a tough position. Instead of gambling that nothing will ever go seriously wrong in your life, do Future You a favor and put a few bucks aside from every paycheck.
If putting even a small amount is a challenge, you’ve come to the right place for help improving your finances. Like A Boss Girls offers great advice on everything from dating on a budget to finding the right side gig to negotiating for a higher salary. Check out the Personal Finance section for more tips!
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