Endless Gibberish

Money Lessons: My emergency fund evolution.

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Roughly 45 weeks ago I decided I would contribute $30 a week to an “emergency” fund. At a measly $30/week it’s grown to $1350+ today. I barely noticed the $30 automatically deducted from my checking account every week too. The trick is not occupy yourself with checking how much is in your emergency fund all the time and it’ll grow passively and you’ve got yourself a small nest egg. It’s also extremely nice to know you have a cushion of hard cash just in case a real emergency situation occurred.

If I aggressively estimate my expenses to be $150 a week, my funds would only last me 9 weeks. My ultimate goal is to get that to at least 6 months. Although right now I’m sure if a real emergency arose where I stopped receiving income I’d aggressively cut a lot of expenses.

As an emergency fund grows, they can evolve into other uses than just being a back up funding source for emergencies.

Bank bonuses - You can use your emergency funds to earn more money by taking advantage of bonuses offered by banks. Your money stays liquid and you still have access to it.

Retirement splurge - It won’t cover your entire retirement but if you’ve reached retirement age and haven’t ever had a need to dip into your emergency fund, chances are it’s probably grown to a sizable amount. Use it for that around the world trip you’ve always wanted to go on.

Opportunity fund - One of the best parts of having cash on hand is the ability to take advantage of opportunities that may arise. Let’s say a neighbor runs into some gambling problems with his local bookie and needs to unload his Maserati at a steep discount for cash or else he loses a finger for each day he’s late. Okay, that’s a bad/rare example, but I won’t be able to tell you what opportunities may or may not arise in your life but your emergency fund allows you the insurance of being able to take advantage of it.

…and ultimately it just feels good to have an emergency fund. You also get the comfort of knowing that if you lost your job or your business the creditors won’t knocking on your door right away. Your emergency fund technically contributes to your total net worth too.