The Importance of an Emergency Fund

Lynnae McCoy is a freelance writer, homeschooling mom, and frugal living enthusiast. She writes about frugal living at Being Frugal.net and about balancing work and homeschooling at Freelance Homeschool Mom. When she has a rare spare moment, you can find her on Twitter.

When my husband and I first got married, some would say we lived on love. We had no savings, poor paying jobs, and very old cars. I’m not sure I’d say we were living on love as much as we were living on the edge of financial disaster.

Several times during our first few years of marriage our cars broke down, as old cars do. They required hundreds of dollars in repairs. It probably would have been better to buy newer cars, but our budget couldn’t afford car payments. Instead, we repaired the cars, charging the repairs to our trusty VISA card.

We ran up a couple thousand dollars worth of debt, and we took close to ten years to pay it off. I’m sure we paid at least $1000 in interest. And that’s $1000 in wasted money.

If we had saved money for emergencies like car repairs, we would have been able to use that $1000 for other purposes. We could have put it in savings toward a newer car. We could have opened a retirement savings account. We could have used it to pay down our student loans, which would have decreased the total interest we paid on the loans.

Having an emergency fund to pay for car repairs would have also decreased our stress levels. We were on a tight budget already, and the increased credit card payments further stretched our budget for years. An emergency fund would also have made us less fearful of medical emergencies and home repairs. At the time, we worried about anything that could go wrong, knowing that we didn’t have the money to pay for it. That’s no way to live.

Today my husband and I have paid off our credit card debt and we have a baby emergency fund, which we’re working at growing. Recently, we had to face another emergency, when my husband’s mother passed away. The funeral was out of town, so we had to pay for gas, food, and lodging when we made the trip.

Though a death in the family is always stressful, it was made less so by the fact that we didn’t have to worry about where the money to pay for our trip would come from. The peace of mind an emergency fund provides is well worth the small sacrifices we made to save the money.