A recent survey of more than 2,000 American adults found that only 27% of single people have an emergency fund. (The same study found that married couples are doing a little better — an estimated 39% have set aside funds for this.) As of today, I’m one of the 73%. I’m single, I don’t have an emergency fund, and I know that I need to change my ways. Since I don’t expect to be married anytime soon, I can’t rely on anyone else’s income bailing me out if and when times get tough.
I have the optimistic human tendency to live my day-to-day life unencumbered by the fear of financial emergency. However, I don’t need to become a full-blown doomsday prepper to acknowledge that there is, in fact, a long list of things that could realistically happen that would leave me scrambling for cash.
I live in Southern California, where earthquakes and wildfires are always a possibility. What if a natural disaster destroyed my apartment? On top of that, in the case of a natural disaster, I could lose some — if not all — of my worldly possessions. What if I suddenly lost one of my main sources of income? I depend on a few of my mainstay freelance gigs for financial stability month-to-month. If one or more of those jobs disappeared, I really struggle to pay my rent.
My smart car is running smoothly for now, but there’s no way to predict if and when my car might need a major repair — or what if I got into a car accident? Naturally, my dog depends on me for financial support. What would I do if my dog needed emergency surgery? What if I got seriously sick or injured, and I couldn’t work for a while? In any of these unexpected situations, I’d be forced to either put the bills on a credit card, or set up a GoFundMe page and beg friends and strangers for for kind-hearted donations. Perhaps needless to say, those options are not appealing to me.
So far, the only way I’ve truly prepared for potential emergencies is through the power of wishful thinking. I simply hope — and rely on the fact — that nothing will go wrong. But deep down inside, I know that’s not good enough, and Future Me would probably be incredibly disappointed in Past Me for financially prioritizing things like new shoes and concert tickets over taking care of my own well-being, safety and stability.
Now that I’ve started thinking about the importance of building my emergency fund, it weighs on my conscience whenever I spend money on frivolous things. In an effort to lower my stress and increase my responsibility, I started looking into what was involved in setting up an emergency fund. Creating one—and regularly contributing to it—is on my list of goals for this year.
I don’t have an emergency fund, and I could end up paying the price—literally.
I used to think emergency funds were something only rich people could afford to have. I’m not exactly rolling in cash, so finding money to set aside isn’t easy. But the more I read about the importance of having an emergency fund, the more it seems like NOT having an emergency fund is the more costly option.
Sure, I can set up a GoFundMe page for free in an emergency, but it would be embarrassing to expose my financial woes on a public forum. I also hate the idea that I would need to rely on other people’s wealth and generosity to bail me out in an emergency. I could easily end up with unpaid bills—and angry creditors.
Without any financial padding in my account, an emergency situation could leave me unable to pay my regular bills, and I could be racking up late fees as a result. If an automatic payment tries to deduct money when my bank balance is too low, I’ll end up with a charge for overdrafting my account. Hypothetically, I could withdraw money from a retirement account, but if I’m not able to pay it back quickly, I’ll have to pay extra charges for that, too. If I borrow from a friend or family member and I can’t make payments on time, it could have a negative impact on our relationship. In the end, not having an emergency account is only okay until it’s not. If something unexpected happens and I need money in a hurry, not having an emergency fund is only going to make a bad situation even worse.
So how do I set up an emergency fund?
Experts suggest setting up a separate emergency fund account instead of trying to build an emergency fund that lives inside of your usual checking or savings accounts. Having a separate account makes it easy to see exactly how much you’ve set aside for emergencies — and it also makes it a little harder for you to access that money on a whim. I have an online bank account that I set up a few years ago, but I’ve never really used it — so I decided that it’s the perfect place to start my emergency fund. If I need money urgently, I can always transfer it back to my regular bank account, but hey, that’s the point of an emergency fund, right? In the meantime, it’s pretty much out of sight, out of mind.
How much should I be setting aside?
The general rule is to set aside enough money to cover three to six months of expenses. (This simple online calculator will even do the math for you!) When I saw how much money this magic calculator said I should be putting aside, I definitely panicked a little. It was a big number; bigger than anything I’ll be able to save in the foreseeable future — but I didn’t let myself get discouraged by that and give up. If your financial situation is anything like mine, try not to freak out over the goal amount. It’s OK if you can’t immediately transfer thousands of dollars into a special, untouchable bank account! Just start putting aside what you can, even if it’s only $50 or $100 a paycheck, or even less. When it comes to emergency funds, ANYTHING is better than nothing.
What if I need that money for a non-emergency?
This is why self-control is important. Your emergency fund is for actual emergencies, and you’ll need to be very clear with yourself about what qualifies. It’s not a vacation fund, a new car fund, a Christmas shopping fund — or anything else. Sometimes you might feel like you reeeeeally need a spa day, but remember — having an emergency fund is the most important act of self-care there is. Why not save up for the nice-but-not-essential stuff in a separate “Treat Yo Self” account?
Life is full of expenses that matter, so if you pull from your emergency fund for non-emergencies, you are putting your future self at risk. Don’t just hope and pray that nothing will ever go seriously wrong in your life. Instead, do Future You a favor and put a few dollars aside from every paycheck into an account that accrues interest. You’ll be pleasantly surprised at how fast it adds up!
If putting even a small amount aside for an emergency fund is too much to tackle right now, don’t worry — because you’ve come to the right place! Like A Boss Girls has tons of great advice on how to improve your finances — everything from dating on a budget to finding the right side gig to negotiating for a higher salary. Head to our Personal Finance section for more tips!