An Emergency Fund for What?

[KiwiJo09]

I was talking to my brother-in-law maybe a month ago, and we got to talking about emergency funds. I told him that my hubby and I have been building up our emergency fund. My brother-in-law has a wife (my sister), and a child. And he seriously asked me what I needed an emergency fund for.

It was frustrating. Just thought I'd share.

[Successz]

You should have said..."you'll see when your transmission or home air conditioner breaks down".

[bjl584]

Originally Posted by KiwiJo09

I was talking to my brother-in-law maybe a month ago, and we got to talking about emergency funds. I told him that my hubby and I have been building up our emergency fund. My brother-in-law has a wife (my sister), and a child. And he seriously asked me what I needed an emergency fund for.

It was frustrating. Just thought I'd share.

Sounds familiar.

[snafu]

Life throws us challenges and if we're not prepared we can get knocked on our butts for a long time. If life throws you an opportunity, it helps to have financial security to grab on and not regret missing...the boat.

[maat55]

Rush mentioned today a study that claimed that more than half of americans could not come up with 2k in liquid funds if needed. It is likely that most emergencies go on credit cards or bank loans.

My older brother is one of those, he could not come up with 1k(deductable) for his central H&A, so he paid 400 for a window unit on his credit card. Personally, I would have cashed in some IRA and fixed the central unit(if I were in his situation).

[disneysteve]

Originally Posted by maat55

Rush mentioned today a study that claimed that more than half of americans could not come up with 2k in liquid funds if needed.

There is a thread about that study:

Half of Americans say that couldn’t come up with $2,000 in 30 days

[snshijuptr]

Have an EF because if life send you lemons, you can buy the juicer to make the lemonade.

[Like2Plan]

Originally Posted by KiwiJo09

And he seriously asked me what I needed an emergency fund for.

I always think this is tough question to answer--because if I knew what the emergency funds were for, it would already be a line item in my budget .... I guess a lot of folks can't relate to random events like house getting destroyed--need temporary quarters and living expenses while waiting for insurance to settle or losing a job for a few months or need extra money for medical expenses not covered by insurance...

[gf1723]

Originally Posted by disneysteve

There is a thread about that study:

Half of Americans say that couldn’t come up with $2,000 in 30 days

I agree with what you said in that thread, DS. I don't think $1000 is enough nowadays. I'm only 26 and single, and I don't even think that's enough. It would clearly cover my 1 month expenses on rent and utilities, but knowing my luck I would probably also have a car problem or something.

Mine has been sitting at $1000 for quite some time because I just wanted a little cushioning and get saving for my yearly Roth payment back on track. A week ago I made an auto-transfer from my paycheck to that account for $50 every two weeks and I'm thinking about upping it even more!

[disneysteve]

Originally Posted by Like2Plan

I always think this is tough question to answer--because if I knew what the emergency funds were for, it would already be a line item in my budget .... I guess a lot of folks can't relate to random events like house getting destroyed--need temporary quarters and living expenses while waiting for insurance to settle or losing a job for a few months or need extra money for medical expenses not covered by insurance...

I don't think it is a hard question to answer at all. I think the biggest, easiest to understand reason for an EF is a sudden job loss. If my boss came in today (which would be tough since he's in Costa Rica ) and told me he didn't need me anymore, I'd be really screwed if I didn't have a nice pile of cash saved up.

Insurance issues are another good reason. Yes, I have auto insurance. Yes, I have health insurance. Yes, I have home owners insurance. All of those policies have deductibles, though. Plus, I may need to lay out money upfront and get reimbursed after the fact. I need to at least have enough set aside to cover the deductibles. Over the years, we've had numerous times when those policies got used and those deductibles got triggered. With health issues, the income loss comes into play at the same time. When my wife had her gallbladder out a couple of years ago, we had to pay the deductible and copays AND she couldn't work for a month or so. Those are the times when that EF is critical.

[Like2Plan]

Originally Posted by disneysteve

I don't think it is a hard question to answer at all. ....

The thing that makes it hard is I can bring up all those things I think of for an EF, a lot of people can't picture it happening to them. The younger they are, the tougher it is to explain...

[gf1723]

Originally Posted by Like2Plan

The thing that makes it hard is I can bring up all those things I think of for an EF, a lot of people can't picture it happening to them. The younger they are, the tougher it is to explain...

When they have to experience it, they will learn. When I first graduated college, I didn't build up an EF, just put some money into savings. Then I had some car repairs, followed by a trip to the hospital one night. They gave me a very strong aspirin and sent me home. The next two weeks I got a lot of bills that added up to around $1100.

I learned after that to have an EF. Luckily when all that happened I wasn't paying rent, so I had a decent amount saved. I just hated seeing that much money come out of my main savings account. Now I have a sub-account directly titled "Emergency Fund". I don't mind seeing the money come out of that account because that's what it's for. Still working on getting that main savings account into 5 digits, almost there!

[cypher1]

This topic reminds me of my friends dilemma when he and his wife wanted to move closer to city for work. They were looking at renting their current home and getting a fixer upper as 2nd mortgage. The idea fell through when bank was asking to show a big chunk of savings equivalent 6 mortgage payments just to know they had money. His wife asked me who has that kind of money saved up, which I easily replied "I do." granted I'm not married, nor have kids. I stopped lecturing about EFs/savings advice to friends until they ask or ready to change ways.

[disneysteve]

Originally Posted by Like2Plan

The thing that makes it hard is I can bring up all those things I think of for an EF, a lot of people can't picture it happening to them. The younger they are, the tougher it is to explain...

I think when speaking to a younger person, you need to use examples that they can relate to. Maybe a hot water heater bursting isn't something that is meaningful to them. Everyone knows someone who has had a car accident. Explain how they have to pay a deductible and may have to rent a car while theirs is being repaired or may need money to replace a totaled car. How about an injury? My 22 year old receptionist tore a knee ligament dancing at a club one night. Had to have surgery and was out of work for 2 months. Appendicitis is common in young people.

Obviously, life experience brings more of a sense of what can happen but I think young people can get the message, too.

[snshijuptr]

Well, many young people I know understand being unemployed. So many of my friends resisted moving back in with their parents even though they didn't have a job (heck some are just about to graduate and do that). Talking about an EF for job loss is a bit easier.

At one point I was talking with a freshman in my taekwondo class. We were spending $300 on sparring gear, and I explained that we had the money set aside. He said something about "unexpected expenses" and I laughed and said that was another account. I then explained that we had a Frivolous account and an EF. I guess the moral of my story is to wait for teachable moments instead of actively educating your friends.

[Jennsnoopy]

EF are definitely important. My son and daughter both have serious medical issues and were diagnosed within 10 days of each other last fall. Talk about needing an EF. Thank God we had it. Medical expenses can really add up!