Good reasons to have an Emergency Fund...

[BMEPhDinCO]

Thought I'd share this with y'all as a nice reminder of why you should have a healthy emergency fund.

My family has one son in his senior year - looking at colleges already, and another also in high school - both are big sports players too. They just drove back in a car with the "check engine" light on and a slipping transmission from break. When they arrived home, the furnace was broken. Christmas (and presents) are right around the corner.

This is a situation where you say "Thank God I had the foresight to save up"!

Do yourself a favor this year, if you don't have money saved aside for "Oh sh*t" moments, instead of buying extra presents, going on expensive trips, etc - start an emergency fund. If you have one, is it big enough to cover something like the above? If not, consider adding to it...

[dojo]

Lovely advice. Yes, people tend to over-spend on holidays never thinking the entire world is in recession. We don't know what might happen tomorrow, but we keep on spending on stuff we don't need.

[KellyJef]

Yes, people tend to over-spend on holidays never thinking the entire world is in recession. We don't know what might happen tomorrow, but we keep on spending on stuff we don't need.

This is exactly why my family is only buying presents to donate to Toys for Tots

[elessar78]

I posted this in it's own thread in General Discussion.

My wife started a new job over the summer and her first 3 months were a probationary period. At 2.5 months she suffers a herniated disc and can't work, needs surgery. Because she can't fulfill the duties of her position the company terminated her (long story).

Anyway, without an emergency fund we would be cooked by any extensive layoff from work. We would be only surviving with only my paycheck-a no frills existence.

I think she's slated to return to her old job this Monday . . . Thank God!

[snshijuptr]

We got pregnant and immediately had expensive testing and complications. Then we found out that my in-laws can no longer pay for my husband's student loans as they planned. We are now stuck with the bill for the next few months. We are getting life insurance for our new family so the premiums will soon be due. Finally holidays are coming up, and the lease on my car runs out in April.

Thankfully we have a car fund, an annual expenses fund, and an emergency fund to cover these expenses. This is why I spend time wracking my brain and listing all of our possible future expenses then set money aside for them every month.

[Robert742]

Unexpected & irregular expenses are the type of things which bust budgets & get people into debt.

I think many people, good at saving money, use too much of their money for long term investment, and the higher expected returns, than building a large emergency fund.

Having at least 6 months of living expenses in an emergency fund is essential, and 12 months is advisable if you are self-employed or your employment is not stable.

A properly funded emergency fund can help you save money on insurance by allowing you to have higher deductibles and "self-insure" for smaller losses.

If you are putting 20% or more of your income into your 401k each year, you might want to consider diverting some of that money to keep building your emergency fund.

[AvaBFM]

I call it the Pineapple Fund

This is crucial advice! And especially relevant as the holidays draw near.

I used to have a savings account that I called the "pineapple fund" that I added $20 every month, dreaming one day to go to Hawaii (hence pineapple). It grew to a tidy sum, never withdrawn from. When my grandfather got terminally sick, I had to suddenly fly across the country, right at Thanksgiving (so it cost me almost $1000). I didn't have the funds on hand so had to pull from the pineapple fund. And because I could make it, I was there to hold his hand as he passed. I have vowed to always have a pineapple fun, not for Hawaii (hopefully I still will go someday) but for sudden important emergencies.

Thanks so much for the great reminder!

[Emerald]

In 2007 I moved to my current location and eventually bought my first home if Feb 08. I had an emergency fund, new car fund, maintenance fund, fully insured, and (within a couple of months) of being debt free. I thought I was set financially.

Then...

2008- Replaced water heater
2009- Replaced roof
2009- Property tax doubled
2010- Replaced heat pump (leaking carbon monoxide into home)
2011- Tree fell on house, replaces roof again and repaired structural damage, $2500 deductable
2011- Mother suffered stroke, and lost drug benefits, did not qualify for assistance. I am paying out of pocket for all medicines, adult day care, in home aids, etc.
3 year cumulative vet bills for 1 dog- $3500.
Now my car is in need of hefty repairs, and is probably not worth fixing.

I've spent all my discretionary money, and part of my car fund, but so far I haven't had to touch the emergency fund. Honestly, the emergency fund is the only reason I can sleep at night.

[Frügal]

Having an emergency fund is absolutely a life saver! We have taken a HUGE hit in our income. We're now making only 50% of what we were making just two months ago, and 27% of what we were making just half a year ago. Quite the hit, eh? And yet, our Emergency Fund has not taken much of a hit. It has shrank a little, but mainly because we divvied it up accordingly. It used to just be savings, but has since been budgeted for EF, Medical, Auto, etc. And, really, EF is just the 'other' or the 'spillover' fund that is tapped into if we really don't foresee something.

[ProjectX]

Last November 2010 I created a Xmas fund, because the year before my GF at the time spent more money on Xmas that she could actually afford. When I asked why she did that, her explanation at the time was, it's Xmas and I have to buy presents. WRONG!

November 2011 came around and I had almost $3,000 in the Xmas fund. My wife asked.. "What's our Xmas budget for year for family and friends?" I said $1,000, and put $2,000 into savings.

[naomibatac]

Good reasons to have an Emergency Fund...

This is very true, we all need to have emergency funds. Even how much we try to make our budget work is we do not have savings to spend for emergencies, our budget will still be ruined. As we all know, a ruined budget can cause a lot of damage in our finances. It is also advisable to put our emergency fund in short term investments to earn more, but can easily be retrieved when needed.
_________
Learn how to budget? Budgeting Tips - Your guide for cash management.

[BMEPhDinCO]

Nice examples everyone!

Anyone else have an example of when having an EF was a great thing?

Another one from me:
I had a car accident in March. The car was totaled but I only got around $8k (after deductible) for it. With the EF we were able to put down cash for a new car (to me - $16k total cost) in one week's time and still have some savings left for other concerns that might come up.

And another quick one:
Our first pumpkin carving in our new house, we locked ourselves out! It was $75 for a locksmith to come let us back in - no sweat with the house EF (although crappy and we learned our lesson).

[HousingCounselor]

I paid off my car in Summer '10. I decided to take my $300 car payment and start a car repair/replacement fund. In June of this year I needed a serpentine belt and two control arms. Costs totaled up to almost $1000. It took a blow to my car fund but I didn't have to touch my emergency or vacation fund.
Now I keep track of of the monthly deposits I make to each fund so that I know what kind of money I'm working with. I have also committed my vacation fund to my emergency fund if need be.