Is an emergency fund enough?

Obviously, the whole point of frugality is to have money around for when things come down the pike.

Tim and I have yet to get on a firm financial footing (say that three times fast) via an emergency fund.

We certainly shoulder a good chunk of the responsibility there. No doubt. We eat too much fast food, and we enjoy a hobby that’s pricey. (Though we’re currently cutting down on the former and taking an all-out break from the latter.)

So, yes, if we were more frugal and better with our financial management, we’d have had more money put aside when things got rough. But I’m not convinced that’s the only factor at play.

A commenter recently pointed out that everyone has “unexpected and even terrible things happen.” In his case a $6,000 new roof and a $1,400 plumbing repair job.

He, however, was more careful with his money. So he had the funds in abeyance when the fit hit the shan, as they say.

So is that all it is? If we’d had a “real” emergency fund, could we have been able to take things as they come?

I totted up the memorable expenses since last August. Here’s the ones worth mentioning:

  • $250 for movers
  • $500 for a fridge for the new house
  • $450 for the guest house stove
  • $450 in plumber repair bills
  • $200 to fix the A/C
  • $3,200 for the car repairs
  • $650 to stock up on eczema products being discontinued
  • $1,600 for an Orkin termite plan (eradication & protection)
  • $300 to demolish the shed (required by the termite plan)
  • $800 for my root canal
  • $150 to fix Tim’s dentures
  • $350 for doctors bills from my miscarriages
  • $1,850 for ER bills from November trip
  • $500 to replace the too-cat-pissed-on-to-save sofa
  • $2,800 for ER bills from May trip
  • $1,700 for two yearly car insurance bills

That’s just under $15,750 in 15 months.

We also put $2,500 on the card for Tim’s parents’ moving expenses, but that was paid back over the course of five months. So I figured it didn’t really count.

So where does that leave us?

With $1,800 on the credit card, $2,100 in ER bills (on a payment plan) and a $1,500 emergency fund. Net -$2,400.

So what if we’d had a healthy emergency fund?

“Healthy” is a relative term, I’m afraid. And given the ups and downs in income, expenses and not-frugal-enough spending… It’s hard to get a realistic idea of what we could have saved up.

So I’m going to ballpark it and say $5,000. That seems like a relatively healthy EF given our history, I think.

Looking at our expenses vs income over the past 15 months, I decided we could have realistically/reliably have put away $800.

Using those numbers — drumroll please — we’d have $365 in an emergency fund and $2,100 in ER bills remaining. Net -$1,735.

Total difference? $665.

Don’t get me wrong, $665 is nothing to sniff at. But it’s also a far cry from the kind of security most of us think a $5,000 emergency fund would provide.

I guess the obvious question here is why there isn’t a bigger difference between the two numbers. I mean, if you start $5,000 ahead then logically you should end $5,000 ahead.

But the psychology of saving vs debt is tricky. It’s easy to keep your nose to the grindstone when you have a credit card bill looming. It’s harder to justify going at the exact same pace once you have a little breathing room.

That’s not the healthiest of dichotomies, but it’s one that I struggle with.

So what’s the point of all this conjecture?

If enough things go wrong and enough expenses hit you on a regular basis, being prepared only gets you so far. It’s important, of course. But it’s not the guarantee that most of us want.

Of course, I’m sure the commenter has more than $5,000 in his account. So maybe he would have been fine.

The thing is, a $6,000 roof and a $1,400 plumbing bill in one year probably seems exceptional to him. (I’m assuming it was in the same year. He didn’t say.) Those kinds of numbers aren’t so surprising to us.

I know for a fact that 5 of the 6 years we’ve been together, we’ve dealt with/paid down $10k or more in debt/expenses. Probably all 6 years, but I’m a little hazy.

And, hey, for all I know these kinds of numbers really are just average. For all I know, other people deal with this much (and more) year in year out, too.

Please let me know if that’s the case. I like to know when I’m just plain rationalizing.

Certainly, none of this has stopped me from working on our EF. But, short of an inability to pay rent/utilities, I also think that an EF is more of a safety blanket than actual protection.


What do you guys think about emergency funds and peace of mind?


  1. says

    You're right. Nothing affords absolute protection. An emergency fund is just that. When the rainy day comes, you can either borrow to fix the emergency, or use your savings. The size of your emergency fund just postpones the day when you _need_ to use your credit card. Or, a bigger emergency fund allows you to handle bigger / more emergencies per month / year / whatever.

    There's always something worse that can happen. But, ultimately, we can only do so much.

    • says

      MBhunter: Yep, nothing affords absolute protection. I guess, to me, an EF is just an extension of a savings account. I get having maybe a special account to save up for a vacation or whatever, but otherwise I kind of fail to see the point of having a savings account and an emergency fund. They seem like one and the same to me.

  2. says

    I think you guys are right. There are a lot of expenses that cannot be avoided. For example, let's take the $200 to fix the A/C. There are probably frugal articles out there teaching people how to live without A/C, but that's not realistic for everyone. I work from home, and I've noticed that I'm extremely unproductive when we don't have A/C during the warmer months. When I lived in Texas, A/C is not just a luxury but a necessity.

    You can always be more frugal–there's no end to how much you can save. But eventually you reach a point of diminishing returns or even start to hurt your finances by saving too much. While it is great to have a cushy emergency fund, you also can't blindly avoid spending any money when it is necessary.

    You've cut down on what you could (hobbies and luxuries) and all the spending you listed seem reasonable and necessary.

    • says

      Will: Thanks for your support. Yes, you can always be more frugal — but we could REALLY have been more frugal. A lot of money has gone to fast food/Magic the Gathering. If we'd put our noses even an inch further toward the proverbial grindstone… Well, we'd be in a much better place financially.

      But we just have to do our best now and hope that we can keep up the good behavior once the credit card is clear again.

  3. Babs says

    Medical emergencies are certainly legit uses for an emergency fund, but I do question the housing repairs and car insurance. Car insurance is generally a predictable expense that can (should) be planned and saved for, not an emergency. As you surely know, house repairs are also a sad part of life and you were hopefully warned in advance about saving a percentage of the house value for repairs. I know sometimes trouble just rains down and it simply isn't possible to plan or save for everything, but home repairs and car insurance should be somewhat predictable.

    BTW, just hit $10K in my emergency fund and it took me 10 years to get there, don't give up! It will happen, and you'll sleep so much better when it does.

    • says

      Babs: First of all, congrats on the EF level. That's really impressive.

      Remember that not all of the items on the list were unexpected. They were simply notable. Obviously, we knew home repairs would enter into the mix. But you can't predict your home repairs.

      So, from what I understand, most people borrow from their EF in such situations. So, it still would have affected our EF's totals — or lack thereof, at some points in the last 15 months.

      Insurance is there because it was a large amount we had to pay, and that amount had to come from somewhere. The first year, we had been too busy saving for a down payment, so it went on the card. It was paid off the next month. But that was less money to put into a savings account. This past year, it came out of the EF, since that's also the only savings account we have. That left our EF at under $100.

      The point is, the large expenses (expected or otherwise) happen, regardless of whether you've put money aside. And since the income and amount we could save each month were the same, the end result is basically the same.

      If we put aside $75 into an insurance account, that's $75 less that goes into our EF or against our debt. Either way, $800 is being put toward debt or into an account. It's just a matter of how you allocate the funds.

  4. imawindycitygal says

    You get to call your savings whatever you want because it is yours. I like how you listed the expenses as "notable," as some of them aren't *typically* the types of expenses that are seen as emergencies. Babs has already pointed this out, but the repairs, insurance, exterminators, and appliances aren't really "emergencies" to most folks. (Again, you get to make the call since it's your money.) It's tough and expensive to enter into home ownership; even more so when you're renting, too (which is essentially your situation with your in-laws).

    My approach to an EF is that it is an amount I need to live on to pay my standard bills for about six months. I also have another "big goals/house repair" fund, because I know that I will eventually need to spend some big bucks on replacing my roof or a running a new sewer line. I've been in my house for 11 years now, and I've learned quite a bit about how much I typically spend on repairs each year and have factored in extra savings for this big stuff.

    Nonetheless I still get surprised every once in a while. I ended up spending around $900 over the past two months to get the hot water radiant heat in my house running properly again. It was an expensive lesson (don't let the handyman touch the radiant heat lines, no matter what experience he says he has!) but one that I could absorb because I had the money available. (Also, you really need heat in your house in late October/November when you live in Chicago!)

    You're not there yet, but you will be. Just give yourself the time and keep saving. If you know that you have high deductibles on medical expenses, then you'll want to factor that into your EF savings plan. Find out what types of things can go wrong with your house/property and how much fixing them usually costs, then make a target to save enough for them, too. It sounds simple, but I know it's hard. You have the perseverance to get there, though.

    • says

      Thanks for the breakdown. I like your perspective. I definitely agree that we need to be able to cover things like insurance and home repairs, preferably without dipping too deeply into the coffers. As we're clawing our way back up to level, it's something to think about.

  5. says

    The bigger the emergency fund, the longer the piece of mind lasts. Also it helps a lot if you cook your meals at home and try lots of yummy recipes that would kick the pants off of fast food.

    • says

      Ariana: The cooking project has been the focus of this past week. Before that, I was at least trying to keep frozen food around for myself, to help defray the costs when Tim would eat out. As always, it's a process.

  6. says

    Depending on how much you put away regularly for emergency savings, whatever you judge an emergency to be, over the fullness of time you'll no doubt get ahead. There will be times when your pot is stressed and depleted, but the the net effect, again depending on how much you save, will be positive over many, many, years. I find that reassuring and means I don't worry when a cluster of emergencies happen over a short period, as chances are there'll be periods when no emergencies knock at your door. How much should you save? As I wrote earlier this year: "As much as you can!"

    • says

      Objective Wealth: I think "As much as you can" is definitely a good attitude — though at some point I'll want to get an actual savings account, I guess. I'm still a little hazy as to the distinction, honestly.

      I absolutely believe we will get ahead — hopefully sooner rather than later — but the thing about a "cluster" of emergencies is that we've had these "clusters" for the six years we've been together. Well, a mix of clusters and student and medical debt. (Like the $6k of oral surgery he needed.) I think our best hope is to just get and keep on top of his health problems now that he's insured again.

  7. says

    While my husband and I have a savings account that is labeled emergency fund, it's got a relatively small amount in it–usually less than a grand. What we do have are about 15 different savings accounts, each one set up for a different savings goal. These include things like saving for a new car, a new computer, vacation, insurance, furniture, home improvement etc. While our EF is fairly small, the entire set of savings accounts is robust. So I think of everything all together as our BIG EMERGENCY fund–because if my husband lost his job, we would be perfectly willing to dip into our new car or new sofa fund. But little emergencies can be evaluated on a case-by-case basis for whether we should dip into the EF or find another way to pay for it.

    I don't know that the way we do things is exactly how the finance gurus recommend having an EF, but it really works well for us. Considering your feelings about an EF being another type of savings account, it might work for you guys, too.

    • says

      Emily: I love that idea. We've been sort of dipping our toe in the water there with our ING account. I wrote a post about starting an "iPod" account for Tim to help encourage him to save. So I definitely want a car fund, a travel fund and whatever other goals we come up with. And, with a slightly smaller EF and what money we do have tied up in goals, I think it'd force us to think outside the box a bit when it comes to covering expenses. Like I talked about a few weeks ago with the "Mama's bank account" effect.

  8. Allie says

    I think it depends purely on the person. For myself, my EF was for both the expected(like car insurance) and unexpected big costs(those hated car repairs). I hate putting a lot of money onto my credit card where I'll probably forget to pay it before the interest starts accruing. For instance,I had finally gotten to a magic number for me ($2500, and I don't know why that magic number in savings makes me feel better but it does.), and then suddenly, I had $1800 in car repairs from my radiator and transmission cooler going out. Finally got back to that amount and then my older brother died suddenly, and even though the Navy reimbursed me later, I had to put out the money first. The EF is the first line of defense against some crazy things. You can never really predict how much things will cost unless you're a bit of an expert ie. my fiance can tell me how much it will be to replace the power source on my computer since he builds computers and I can tell him how much the glass on his car will be to fix(I work in the glass claims unit for an insurance company). I think you're doing rather well considering. We're all fighting our own battles.

    • says

      Allie: I'm sorry to hear about your brother. Like you said, we all have our magic number. I don't think I'd want too much more than $3,000 in our EF (aka, twice what we have now). At least, after that, I'd want to start diversifying more and set up funds for our goals: double pane windows, some travel, a replacement car. All that stuff. Rather than compiling a big EF and then having no other accounts — ones that it would be "okay" to spend — would bring only a weird only half sort of peace of mind.

  9. Christina says

    Like someone before me mentioned, to us an emergency fund contains at least six months of expenses. And, although by definition emergencies are hard to predict, in addition to the six months we also have enough to cover some likely problems.
    For us, we have ill relatives that live far away so travel expenses for a funeral are a possibility at any time. We also have (two) five-year-old a/c units and although that isn’t ancient by any means we still know how much they are needed in Arizona summers (and spring and fall).
    For you, medical emergencies seem to be your achilles heel so I would definitely want enough to cover the ambulance ride/ER visit that is always a possibility. With an older house and older car I would also want enough in an emergency fund to cover possible big repairs in those areas.
    I’m well aware that you can’t plan for everything, but I do feel that you can get a general idea of what you need by analyzing the “emergencies” that have come up in the past.
    If you don’t have a realistic emergency fund for your family then all you’ll be doing is emptying it over and over for one of a dozen reasons.

  10. Swimmer says


    For me the EF is for truly unexpected things such as tree roots growing in a sewer line whereas savings are for planned purchases such as a new car, windows for the house etc. I use the savings account to save for car/house insurance and regular house maintenance etc. It's definitely a challenge some months !

  11. JohnnyK says

    I personally make sure to always always always have 3 months worth of liquid cash in the bank to support my current lifestyle. Including groceries, gas, insurance, bills, etc.

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  13. says

    Those kind of expenses do seem a bit high. But it's good to get a baseline of what you individually deal with. $6,000 in home repairs in a single year is a bunch but could be relative. If he hadn't done any work to his home in the past 5 years then he's doing great. I was recently hit with my alternator going out and it cost $975 total and almost a full day of my time. It almost cleaned me out and I'm slowly building my emergency funds back to an acceptable level.

    • says

      Sometimes the only thing we can do is just work on not getting discouraged. That can be a bigger barrier than the actual issue of a smaller emergency fund. Keep on plugging away.

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