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11 Emergency Fund Examples + Tips For Saving

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Are you considering starting an emergency fund or rainy day fund? If so, you’re in the right place.

We will go through 11 real-life reasons you should start an emergency fund, with emergency fund examples and use cases.

In a recent study by Bankrate, nearly 4 in 10 Americans would have to borrow money to cover a $1,000 emergency. That’s almost half of Americans.

That’s unacceptable. Starting an emergency fund and reaching your savings goal is very possible. This list should help motivate you to start.

In the end, I will answer some important questions that you may have, such as how to build an emergency fund fast, how much to save, and more.

Let’s begin.

1. Car trouble

Unless you lease and get a new vehicle every 2–3 years, you’re probably going to need an emergency fund to cover surprise car repairs.

This has to be one of the most common surprise expenses. Most of us can relate to it, and there is literally no telling when something can break on your car.

For example, recently, the window motor on me and my wife’s car broke while at a drive-thru. In the dead of winter. With a newborn baby.

Needless to say, we took it to the mechanics the next day and got it repaired for close to $500. Luckily we are good about saving for emergencies, so this wasn’t a problem.

But imagine if you didn’t have an emergency fund. You would just have to continue driving with your window down in 20-degree weather. Definitely not an ideal situation.

2. Home repair

If you are a homeowner or considering becoming one, you need a rainy day fund. It should go without saying, but owning a home can be very expensive.

For example, did you know that the average cost to replace a roof is between $5,100 and $10,000? This cost changes depending on many factors, but you get the idea.

If your air conditioner breaks in the middle of summer, you’ll have to pay between $3,800 and $7,500 to get it replaced.

These are just two examples. Houses have many moving parts, and those parts eventually get old and break. Do you have an emergency fund large enough to handle the cost?

My wife and I own a beautiful townhouse that we love. Although we’ve only been here for a short period, we’ve already had several expensive problems.

For example, our main breaker box had old beat-up wiring. It was so bad that you could actually hear the electrical current every once in awhile if you were in the basement.

Considering that this was an extreme hazard, we contacted an electrician immediately. He came out, fixed the problem, and left. Oh, and he gave us a bill for about $600, which we could pay quickly because of our emergency fund savings.

3. Home appliance repair

In addition to home repairs, it may also be a good idea to save for home appliance repairs or replacements.

And I’m not talking about your toaster. I mean major appliances, things like your refrigerator, washer and dryer, dishwasher, and kitchen stove.

Like with anything mechanical, parts break. How would you handle your refrigerator suddenly dying? How quickly could you head out and buy a new one?

Low-end refrigerators can cost between $350 and $500. If you want something a little nicer, expect to drop between $1,000 and $2,000.

If you are a homeowner, or even a renter (some renters need appliances), then having an emergency fund ready will give you peace of mind.

4. Medical emergency

Medical emergencies can be very costly. I personally hope you won’t need to worry about this.

However, accidents do happen. This is especially true if you have young kids running around playing.

I can’t count on two hands the number of times my brothers or I got badly injured growing up. Sprains, fractures, bad wounds that required stitches (no broken bones, fortunately), you name it.

If you have health insurance, your insurance will cover most of your medical emergency costs. However, there are still expenses that you’ll need to pay, such as your insurance deductible.

Having an emergency fund in place will help you weather these storms. You may even consider setting up a separate fund in addition to your emergency fund.

Some people have what’s called an HSA, or health savings account. These are emergency funds specifically for covering medical expenses.

5. Pet emergency

I’ll be the first to admit it, pets are wonderful. It’s actually scientifically proven that having pets can improve your mental health.

But, let’s face it; they can also be expensive. In fact, the average cost of owning a cat or dog exceeds $1,000 per year. And this isn’t even counting emergency veterinary visits.

Veterinary visits are where pets can start getting very costly. The average cost of an emergency vet visit can be anywhere from $800 to $1,500. And this doesn’t include surgeries.

In worst-case scenarios, pet surgeries can cost you upwards of $4,000.

My wife and I have two cats. We had to take one to the vet to get his mouth examined because we noticed that his breath was smellier than usual.

The vet took him, cleaned his mouth, did a quick examination, and then sent us on our merry way with a $475 bill. Yes, we essentially got charged $475 for the vet to brush our cat’s teeth.

What’s the bottom line?

If you have pets, be prepared for unexpected expenses. Have an emergency fund ready so that you can take care of your furry friends if/when you need to.

6. Job loss

Of the many surprises life throws at you, losing your job may be the scariest one, especially if you have a family to take care of.

If you don’t set up an emergency fund for anything else, at least set it up for this reason.

I remember when I first left college, I started a job at a staffing agency. After almost two years there, some very unfortunate things happened that forced me to leave the company.

Luckily, my wife and I had been good about saving a little money, so leaving that job wasn’t a huge issue.

The free time I had after leaving that job allowed me to launch my freelancing career. I earned 3x what I would have made at the staffing agency alone as a freelancer in my first year. And it was really all thanks to the small emergency savings we had.

You can’t put a price on peace of mind. Even if you have a stable career with a great company, it’s still in your best interest to spend time building an emergency fund.

7. Unexpected travel

Unexpected travel can happen for many reasons—the most common reason being a family emergency. And as you probably already know, when you have to buy plane tickets last minute, all deals go out the window.

You can expect to pay up to 30% more for your plane ticket if you buy it last minute. This is compared to buying it planned in advance, which is usually cheaper.

But there lies the problem. You can’t plan unexpected travel. And this is why having an emergency fund is critical.

The last thing you want to do is tell your family you can’t make it because you can’t afford a plane ticket.

When my grandmother passed away, I only had five days to plan a funeral trip to Michigan. If I can recall correctly, my plane ticket was close to $500. On top of that, I had to rent a car, which added another $200.

However, none of those expenses mattered. Ultimately I was able to draw from my rainy day fund and cover the costs of traveling last minute.

8. Moving expenses

I know what you might be thinking, moving expenses? Don’t you plan a move? Yes, but not always.

Although this expense is less common, it’s still a reality for many people, particularly if you’re in the military or have a job that requires you to move occasionally.

For example, most military families move every 2 to 3 years. Depending on your rank and job, you could be moving even more, such as once every year.

While the military does reimburse your moving expenses, you’ll still be required to pay out of pocket initially. These costs could be very unexpected. Having an emergency fund in place would help you stay afloat.

The same is true for having a job that requires you to move. Your company could send you to Topeka at last minute’s notice. And while they will likely reimburse you for the move, you’ll still be responsible for the expenses initially.

Save yourself the headache and start saving toward an emergency fund just in case this scenario becomes your reality.

9. Unexpected tax bill

I don’t know anyone who enjoys getting a letter with the IRS logo stamped on it. Even if you have nothing to hide, it’s still intimidating.

Your fears become a reality when you open that letter and discover a big tax bill. However, fortunately for you, you have a contingency plan—an emergency fund.

This situation may not apply as much if you are a W-2 employee who did not claim Exemption. However, if you did claim Exemption on your W-2, you will get a tax bill.

If you are self-employed, you are usually more subject to a tax bill, even after paying your initial taxes. You could even systematically set money aside all year to prepare for your tax bill, only to be shocked when the IRS asks you for more.

This happened to me. The IRS sent me one of their scary letters saying I owed them $1,000 in taxes, even after already paying what I thought was the right amount.

As I said earlier, if you are a W-2 employee who did not claim Exemption, then you likely have nothing to worry about. In fact, the IRS will usually owe you a tax return.

But for anyone self-employed, you should have an emergency fund prepared for possibilities like this.

10. Surprise pregnancy

A surprise pregnancy can be a grand example of why you need an emergency fund. Anyone who’s had kids knows how expensive they can get, even as newborns.

There are many factors to consider, such as a car seat, crib, formula if you aren’t breastfeeding, clothes, diapers, and many other things.

And of course, there’s the possibility of one parent staying home from work to raise the baby. The other option would be childcare, which can cost as much as a mortgage each month.

Even if you have the full nine months to prepare saving money for your new baby, that may not always be possible. You may have other expenses that you need to prioritize first.

It’s always better to have an emergency fund prepared so that you don’t have to stress about saving thousands of dollars quickly.

11. Miscellaneous expenses

The last example of why you need an emergency fund is because of one word: life. Life throws you curveballs all the time—and never when it’s most convenient for you.

You need to have solid rainy day savings for all the random expenses in life.

For example, you drop your phone on the concrete, and to your greatest fear, your screen is shattered. You’ll need to replace that. And even cheaper model smartphones will cost you anywhere from $500 to $1,000.

Or, how about a neighborhood kid accidentally throwing a baseball through your window. There goes several hundred dollars out the window (pun intended).

I recently had the experience of a random life expense. I’ve been using a trusty 2013 iMac for years now. It wasn’t until recently that Apple decided to stop supporting my year model iMac. 

This means I’ll essentially need to upgrade my computer for safety reasons. This happened completely out of the blue. It’s a good thing I have a healthy savings to pull from.

How much emergency fund savings do I need?

I’m sure you’ve heard the general rule of saving at least three to six months’ worth of living expenses. However, I’d say this is the absolute minimum. You would greatly benefit from saving more, as much as one year’s worth of living expenses.

To give you an idea of what this looks like, let’s say your monthly budget is $3,000. Your emergency fund should look like this:

  • 3 months — $9,000 saved
  • 6 months — $18,000 saved
  • 9 months — $27,000 saved
  • 12 months — $36,000 saved

The idea with an emergency savings fund is to plan for the worst possible outcome. Listen, I’m all for optimism and hope. However, that has no place in your emergency fund strategy. Otherwise, it won’t work.

If you only save $1,000 when you know for a fact that your family needs $2,500 per month to survive, then you are not saving enough.

Where should I keep my emergency fund money?

There are a few places you can store your emergency fund money. The conventional wisdom would say keep it in your savings account at your local bank.

However, depending on your emergency fund’s size, it should be split up and put in different places. For example, let’s say you manage to save $10,000 for your emergency fund.

You may consider taking a portion of that and putting it to work in the stock market or with bond ETFs.

If you did have to dip into your emergency fund, the odds of you needing the entire $10,000 at once would likely be slim to none. But even if you did, both stocks and bond ETFs are highly liquid, meaning they can be converted into cash quickly without losing much value.

Here’s the deal:

If you keep your emergency fund (or any savings for that matter) in a traditional savings account, you are getting poorer.

Every year your savings are losing value to inflation, and the interest on traditional savings accounts are so low, you might as well let your dog invest for you—you’d probably get a better return.

Rather than keeping your emergency fund in a traditional savings, open a high-yield savings account and store it there. The interest in high-yield savings accounts is significantly higher than those of traditional savings.

So, what’s the final answer? Keep your emergency savings in a high-yield savings account. If you want your emergency fund to grow bigger, put some of it to work in the stock market, and leave the rest in a high-yield savings account.

How to build an emergency fund

You’ve seen 11 examples of why having an emergency fund is important. Now it’s time for you to actually build your emergency fund.

There’s obviously no right or wrong way to go about this. If you can effectively save your money and put it toward an emergency fund using your own strategy, great. However, if you are struggling to begin, continue reading.

I’m going to give you a very simple 4-step process that you can use to start saving toward your emergency fund today. You can use this process regardless of your income level or experience.

Step 1: Determine how much to save for your emergency fund

The first step of saving for an emergency fund is to set up a goal and decide how much you want to save. This is a crucial step that should you should not skip.

Can you imagine watching a basketball game where there weren’t any basketball hoops? Or what about a football game without any touchdowns? That would be pointless, right? Neither team could score points. Therefore, no one could win.

Setting up a savings goal is the same way. Deciding on a specific dollar amount will increase your chances of reaching your goal.

If you wonder how much you should save, refer to the section above where we discuss this in detail.

Generally speaking, you need to save for at least a few months worth of living expenses. If your family spends $2,500 per month and wants to have a backup fund for at least three months, you’ll need to save $7,500.

I know that may seem like a large number. That’s why it’s important to take it one step at a time. Start small, set milestones and celebrate mini-victories, and be consistent with your saving.

Step 2: Begin setting money aside

Now that you have a savings goal in place, it’s time to begin saving. I’ll be honest, this step will be the most difficult. It can be hard to split from your money. But if you use the right tools, the process can be much easier.

For starters, it’ll be easier if you automate your savings. Automating your savings literally means having your money saved without you ever having to move a finger.

There are a few different ways to do this, such as:

  • Using an app
  • Setting up an automatic transfer in your bank account
  • Having the HR department at your job deposit your paycheck into two separate accounts

Of all these automating strategies, using an app is by far the best. Here’s why: many finance apps nowadays have helpful features that extend beyond what your bank account could offer.

For example, Acorns not only lets you set up automatic scheduled transfers into a savings account, but you can also save using their Round-ups feature.

Round-ups will automatically round up your purchase to the nearest dollar, and either save the difference or invest it. This means if you bought a coffee at Starbucks for $4.56, Acorns will automatically round up that purchase to $5.00, and save or invest the $0.44 difference.

This may seem small, but you’d be surprised by just how much spare change adds up over time.

In addition to Acorns, there are other apps you can use to help automate your savings, such as Stash, and M1 Finance.

Acorns
See our full Acorns review here.
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M1 Finance
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Stash
See our full Stash review here.
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Step 3: Download a free cash back app

When saving for your emergency fund, it’s important to save from your paycheck and also save on your purchases.

By saving money on your day-to-day expenses such as groceries and online shopping, you’ll have more to put toward your emergency fund.

Start by downloading a free cash back/coupon app. There are a ton of free options available. I would highly recommend Ibotta for groceries and Honey for online shopping.

Depending on how much you shop, you can save as much as $500 or more per year by using a free cash back app.

Step 4: Make extra money on the side

Making extra money on the side is optional but highly recommended if you want to meet your savings goal faster. 

There is an infinite number of ways you can earn money, even from the comfort of your home. For starters, you can use any gifts or talents you have to make money sites like Fiverr. On Fiverr, you can post “gigs” and earn money in dozens of categories, including graphic design, marketing, writing, video, and music.

Surveys are another great way to make extra money. They’re fast, easy, and you get paid for giving your opinions.

Some surveys can turn into bigger opportunities with higher pay. For example, I was once invited to visit an Arby’s, order a new food, and rate it. I got paid an easy $25, plus my meal was paid for.

Making money on the side is an extra step you can take to build up your emergency fund faster.

Conclusion

As you can see from the examples, life is full of surprises, both good and bad. For the bad surprises, you want to be prepared.

By now, you should be motivated and ready to start building your emergency fund if you don’t already have one.

While it seems daunting at first, if you stick to the four steps above, you’ll be able to save a sizeable amount of money in no time.

Start small, maybe save $1,000 first, then continue saving more until you’ve finally reached your goal.

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