What is an Emergency Savings Fund (ESF)?
An Emergency Savings Fund is money that you set aside each month for many reasons such as
- Loss of Job
- Unexpected expenses ie: Furnace- A/C- Vehicle-Roof
- Disaster of sorts
- Peace of mind
- A bucket of change in your closet or money under your mattress-This is only good for rainy day spare coin to save you from gong to the ATM.
- Line of Credit, HELOC (home equity line of credit)- some people use this as their emergency fund however I would suggest this as a last resort. Save for your emergency fund in a special place.
- Family and Friends- Thinking you can run to your family each time there is a crisis may be draining on friends and family.
- Pay Day Loans- Please, Please don’t get caught in this revolving door. Pay Day Loans are simply loans that cost you a fortune until your next pay-day. That still means you are short to pay the next bill and the next…….
I can remember from a young age that I would always keep a buffer in my Savings Account. I was terrified to see that I had no money in my bank statement book. I’m not sure why that terror took me on at such a young age but it’s never left. I don’t even think the term “Emergency Savings Fund” was coined back then.
Where to put Emergency Savings Money?
There was always something tearing away inside of me about keeping my account above $3000 at all times. If I dipped below that mark I knew I had to push harder to save more.
Today most people simply keep their emergency savings in a separate high interest savings account or in a TFSA. Some like to invest their Emergency Savings but if risk doesn’t sit well with you perhaps going the simple route is best.
Keep in mind in the above scenario I was young, living at home, no vehicle, rent or groceries to pay for. So what was the big deal? Why was I so worried about that savings account? Somehow I developed a need to think into the future and I still do this today. Is it a bad thing? I don’t necessarily think so but I try to balance my forward thinking with the present.
I believe forward thinking and planning for the future to be imperative when financial planning. I know what I did as a child with no known budgeting or money management skills is now on every financial guru’s budgeting list.
If one continues to only think about today it could be eye-opening if you are not ready for something that could happen tomorrow. What if we didn’t have credit cards, lines of credits/loans and leases. Do you think everyone would pay cash and live happily ever after. I doubt it. People would continue to spend as if nothing else mattered.
What does an Emergency Fund mean to you? This is what it means to me:
It means a feeling of waking up in the morning and knowing that if something were to happen today we’d be fine financially. We would not crumble with despair. If you’ve never experienced this feeling it is the best feeling in the world after LOVE.
Money matters can cause stress related Illnesses so preparing for an emergency might help ease some stress.
How hard is it to Save for an Emergency Savings Fund?
Saving for an emergency fund can be as little as $10 a month or as we like to do,budget it right in, similar to paying ourselves first. We budget around 15% of our net towards our emergency fund. It doesn’t always work out each month but for the most part as long as we stick to the budget the ESF is golden!
We like to keep at least 6 months to a year of expenses in our Emergency Savings Fund. Some people like to keep 3-4 months it really depends on what makes you sleep better at night.
I don’t have or make enough money to save?
If you tell me you don’t have $5.00 a month for an Emergency Savings Fund then I will tell you that you don’t need the pop, chips, video games, pizza, cable, cell phone etc. You need the Emergency Savings Fund. You should prioritize your needs vs wants. You should check your budget and see where you can make changes.
So many times I hear my mates tell me they are skint (broke) yet they are texting me on their IPHONE and driving a Mercedes.
I realize not everyone has spare money in the budget but all I’m asking is for you do whatever you can to save.
Some Ideas on how to make changes?
Use Vinegar to clean up your budget instead of purchasing costly cleaning supplies
Buy Clothes at the second-hand shop- You can find so many great deals at second-hand shops. Save the difference in your ESF!
I hope I have inspired you to save a buck or ten and wake up feeling great in the morning knowing everything will be ok. If not revisit the childhood story of The Little Engine that Could. Never give up trying!
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