Why You Need An Emergency Fund (Plus How To Save It)

This week we had a $2,700 emergency. And that's why you simply cannot neglect to build an emergency fund.

But not just that, you need more than one emergency fund. You need multiple emergency funds that cover all areas of your life that you could have a major unexpected expense in.

We currently have 3 different emergency funds, but we may introduce more down the road if we need to.

Also, we're using 5 specific savings strategies to build our emergency fund back up before the next one strikes.

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PS: If you have an Amazon Alexa, I just launched a brand new daily flash briefing called 30 Second Money. It would mean the world to me if you checked it out in your Alexa app.

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Sinking funds are a godsend. I had a million things coming up in the next 3 months (car registration, conference, being in someone's wedding) and it felt so much better to save a little every month and pull the money out versus having to put savings on hold to handle these expenses.

[TruFinancials]

I love the idea of having multiple emergency funds, similar to having multiple sinking funds! Great video, Nick!

[mappedoutmoney]

After rewatching this, any idea how many times I said the word "emergency" lol geez😂

[TessAbroad]

Never thought about multiple emergency savings funds but I’m intrigued!

[karijames]

You nailed it! We tend to focus on one thing at a time but we really need to split our focus in two, saving and paying off debt. It will take a little longer but the peace of mind that comes with having money set aside is priceless.

[pajamamama]

This makes so much sense to me. With a house, 3 kids, 2 cats, one income, and an unpredictable commission based one at that, we've been wondering how much to save up. Makes me rethink things. I really appreciate this video! TFS

[biblethumber]

First, I have been greatly helped by your videos! Thanks. But I like it better when you’re in the RV. That looks a lot like a house in the background 👍😊

[BOS]

Great suggestion about having multiple emergency funds. I still have a question about emergency funds. We met our goal for the emergency fund for 3-6months expenses. If we have already met the goal, do I still need to keep track of it on YNAB(have a category for it)? I'm only few days into Ynab, so watching your videos and others and reading old threads on reddit. Do you have a video regarding what you do on Ynab once you have met a goal? How do you handle it? Do you re-name or hide the category?

[Couplemoney]

Great tips Nick! Financial rules of thumbs can be helpful, but it is better to tailor things to your situation.

[SitoAlvina]

this hit hard last year at the beginning of covid for everyone .who would have thought the entire world would shut down ! Setting aside sinking funds = peace of mind and youll sleep better at night .

[honestlynate]

I realized that many of our emergencies...we knew it could happen. I started a category with 18 mnth, 3 yr and 5yr I knew it funds. All affordable and possible to reach

[biblethumber]

I was just going to say how I loved the inside of your Airstream, then thought I'd get funny... I figured you were at someones house. Thanks for the reply! 👍😅

[CherylMacKayf]

Sorry. I’ve been MIA. Catching up now. I never thought of separating EFs.! Easy to do. And your right, it’s a psychological thing. Thanks for tips.

[steem]

This is great,
thanks! Would you recommend HSAs?

[PrinciplesofIncreaseTV]

OMG... I hear you! We spent $3k on fixing our roof last year. Emergency fund is #bae, LOL...

[CandisSarwan]

Hi Nick,

Want to start by saying, keep up the great job with these videos. They are very comprehensive and insightful. I feel like I'm always thrown new ideas on how to think about my money after watching them.

Secondly, I recently started using YNAB and have built a Savings Category that I currently have my one Emergency Fund under, I've reached half way towards a cushion for job loss but realized major vehicle repairs and major medical bills are two additional funds I am considering adding after watching this video.

Do you have any tips or ideas on how to fund these? By that I mean should I put funds across each of them equally? Or do I tackle them one by one? They're all somewhat important since I have a used Honda CR-V and do have an Autoimmune Disease that impact me drastically from time to time.

Also, how do you figure out amounts for things like major vehicle repairs and medical emergencies?

Any thoughts you can share on how to approach funding these 3 new emergency funds would be greatly appreciated.

PS: If you could make a YNAB video on how you would approach this would be awesome also.

Thanking you in advance and looking forward to your reply.

Candis

[Kelly-oekr]

Insurance deductible/excess is NOT an emergency, sure you don't know when you will need to file a claim with your insurer but you know that your car insurance has a $600 excess. Not all insurers will deduct the excess amount from their payout, you may need to pay this money upfront before your insurer will process your claim.

[StefanieOConnell]

no house, no pets, no kids, no vehicle, thank goodness!

[nathanboler]

i only have an ermergency FUNd account...