Most people believe in the idea of an emergency fund regardless of what you call it. I believe that having that extra bit of saved up money just in case you need it is something that every one thinks you should have. But how many people actually have an emergency fund? Let alone one that is worth of that status; the answer would be very few.
I saw a post over at Blogging Away Debt where Tricia finally got her emergency fund up to the amount that she wanted to have it at. I applaud her; she’s managed to pay off half her debt and set aside a healthy amount of money so she doesn’t have to worry about the little things that life throws your way. It’s a challenge to set aside money for the just in case when you’re struggling to maintain the payments that keep you going from day to day and from week to week.
I firmly believe that the paycheck to paycheck life that many people in North America lead is partly to blame as is the excessive debt load too many of us carry. Right now I am not really in a position to set aside any significant amount of money into an emergency fund but that doesn’t mean that I don’t. I’m setting aside $50 out of every pay that goes directly into a mutual fund. Not exactly the ideal emergency fund but that $100 per month does add up fairly quickly and it’s bailed me out of a couple fixes already. Even a small amount can get you an emergency fund that can prevent you from needing to rely on your credit cards.
What is an ideal amount to have?
I’ve seen many different takes on this. Some people say that you should have 3 months of living expenses, others 6 months; others still say you should always save 10% of your money in your emergency fund. In truth I think this should depend on your lifestyle and your needs. I would love to have anywhere between 3 to 6 months of money set aside just in case. With this kind of a cushion I would not have a problem if I were to loose my job.
I am no where near that amount and realistically I might not get there for a little while. But I understand the need for it and I will continue to set aside money. Congrats again Tricia for getting your emergency fund up and running.