Why You Need an Emergency Fund

I was recently reminded of why it is so important to have an emergency fund in place and why we choose to live below our means.  Tracy and I both drive older cars that are completely paid off.  In fact, we have not had a car payment for over 7 years.  Tracy drives a 2005 minivan that has over 100,000 miles on it and I drive a 2002 SUV that is approaching that mileage amount.  Since these cars are getting older we know that they are probably going to start needing some repairs to keep them up and running.  A few weeks ago, this came true for me.

Emergency FundMy car has never really had any major repairs needed on it.  I am very good about getting it serviced when I am supposed to and (fingers crossed) have been very pleased with its performance.  The Monday before Thanksgiving, I took it in for a routine oil change.  Well, the mechanic found a few things that needed to be repaired and the total for these repairs was a little over $900.  YIKES – a little early Christmas present.  :)

Needless to say I was not too happy when I heard this but, when I had a few minutes to catch my breath, I was actually thankful.  No, not for having to pay $900, but that I had this amount in my savings account and was able to write a check and pay for this free and clear.  Thinking big picture, this amount is around 2-3 months of car payments so the repair was definitely worth it.  In addition, we still had a Christmas fund set up and this did not affect the presents we were able to buy.

We have had a few things like this come up in the past (range breaks, ac needed repairs, brakes on Tracy’s mini-van needed to be replaced, etc.) and have been able to pay for these with our emergency fund.  Like I mentioned above, I am not pleased that we have these repairs but, when I take the time to analyze these a bit, these costs make me realize why we have lived below our means for so many years to save money in our emergency fund.  You see, if you drive a car long enough, live somewhere for a good period of time or have kids, things are going to break and need to be fixed.  Having an emergency fund in place helps change what could have been a catastrophe into an inconvenience (a big one, but not a life-changing event) instead.

In this time of constant consumption by many, it can be hard to be different and actually set money aside instead of spending every dollar that comes in.  These expenses remind me why Tracy and I live differently than many – the freedom we have.  Dave Ramsey says it often but it so true – “The borrower is servant to the lender.”  This is so true.

What does having an emergency fund mean to you?

About Danny Kofke

Danny Kofke is currently a special education teacher and author of “How To Survive (and perhaps thrive) On A Teacher’s Salary.” His frugality has enabled him to pursue a job he is passionate about and, at the same time, support a family of four on his salary alone.

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  • http://twitter.com/StumbleForward Chris Holdheide

    I think a lot of people under estimate the power of having an emergency fund. Ever since I’ve started mine I’ve worried a lot less about the bills and more about the things that matter.

  • FinanceInspired.com

    I have my own ‘mini’ emergency fund which I literally hide from view in my wallet, so if I ever get stranded with no money at least I could take a cab home.

    • http://www.onemoneydesign.com/ Jason Price

      That’s a good idea. I never have cash on me, but it would be smart to hide a $20 in my wallet somewhere just in case.