While Jeff Bezos and Amazon are ravenously devouring the entire retail world, things aren’t so rosy for the rest of us. Bankrate has released another unsettling survey about the lack of financial security of American families. In this one, they divulged the result that 24% of American families do not have even a single dollar in an emergency fund. Not even a dollar.
And here is the scariest part. This number is an improvement. This is the lowest level of completely savings-less people since Bankrate began doing the survey in 2011.
Going through life without an emergency fund is like getting on a tiny little plane without any parachutes. You hope that the flight will go smoothly, but you want to be ready if a bird flies suddenly flies straight into the engine.
Instead of yet another article about how and why you should have money put back for a rainy day (you can find that kind of article here if you need to get the info on how and why), I wanted to share some real-life examples of times that my own emergency fund saved my bacon.
20 times an emergency fund made all the difference for my family
I’d also like to preface this list with the fact that I am not rolling in money. I’ve been a single mom for 14 years, raising two daughters. For a while, I received a small amount of child support, but that abruptly disappeared 7 years ago when my children’s father suddenly passed away. Despite many financial ups and downs, one thing remained constant: I paid my savings first so that I could handle a rainy day. I treated it like a bill so that I would never be truly broke if I could help it at all.
Some of the emergencies of my life won’t ever happen to you but in their place, there will be other emergencies. On the other hand, many of these will probably be relatable because they are just the stuff of life.
Also, it’s important to note that it wasn’t just cold hard cash that saw us through these tough times. The emergency fund was aided and abetted by a pantry full of supplies that I didn’t have to purchase during difficult periods as well as a mindset that allowed me to embrace living very frugally. These two things are just as important as cash in the safe (or bank or mattress – wherever you happen to keep it.)
- When I got divorced – Instead of spending every dime while I was married, I had always put a little money back. In my mind, it was a vacation fund. I wanted to take my kids to Disneyworld, but the trip had never emerged. When things became irreconcilable, I wasn’t trapped because I had enough money to find a small, yet suitable place to live in a neighborhood near my children’s father so that we could continue to each spend time with them and co-parent, despite our own issues.
- When I was working a minimum wage job – After being a stay-at-home mom who ran a home daycare, I suddenly found myself in a teeny little apartment with no resume. The only job I was able to find for the first while was a minimum wage one. After paying for childcare and rent, there was barely enough money to put food on the table. Still, I clung to the remainder of my emergency fund, doling it out carefully to supplement our small grocery shopping trips and pay for those things that came up at school for the kids.
- When I got an opportunity for a better job – You can’t exactly use the same grungy wardrobe that you did in a job planting seedlings in a nursery when you go to work in a sales position selling high-end merchandise. Even though I bought nearly all of my work wardrobe second-hand, it still cost money that wouldn’t have been available on a minimum wage budget.
- When my daughter broke her wrist – Even in Canada where most of the medical care is covered, something like this costs money that can strain an already tight budget. There was the trip to a pediatric orthopedist, outrageously expensive parking at the hospital, and a little snack after what was supposed to be two hours turned into an 8-hour affair and our home-packed food had long since been consumed.
- When my car broke down when we were out of town – Once when I had taken my kids to a museum about 3 hours from our home (an outing I had budgeted for), our car broke down rather catastrophically. The brake line had rusted through due to the road salt and harsh Canadian winters. There was absolutely no alternative but to get it repaired immediately since you can’t go if you can’t stop. Brake lines are a pretty extensive repair with the potential to snowball far beyond the original quote. As well, we were stranded there overnight while the shop completed the work. This meant we also needed a motel room and some food.
- When my daughter had scarlet fever – When my oldest daughter was 11 years old, she contracted scarlet fever, which sounds archaic and horrible, but is actually just strep throat with a rash. However, she was very sick and I ended up having to take two weeks off work to care for her. Two weeks off work = two weeks without pay which = an entire missed paycheck.
- When my heater died on Christmas Eve day – You know how things always happen at the worst possible time? Well, one memorable year back in Canada, my furnace suddenly stopped working the day before Christmas. I couldn’t get anyone out there immediately, so we bundled up and celebrated Christmas in one room in our parkas. I had to pay a premium rate to get a person there on the day after Christmas (Boxing Day in Canada is still considered a holiday) but on the 3rd day in the middle of a Canadian winter, you’ll pay just about anything to get some glorious heat. (This was before I was into prepping in any way other than an emergency stockpile. In fact, this was what inspired me to begin thinking about things like secondary heat sources and more general preparedness.)
- When my dad got sick – My dad became terminally ill when I was still living in Canada. I took off work and drove back and forth to Memphis several times to help my mom and soak up every moment I could with him. At this point, I was in a better position financially and had several months of expenses put back.
- When I got laid off – The automotive industry provides you with one of those “feast or famine” kinds of jobs. When the money is good, it’s astonishingly good, but when there is a downturn, heaven help you if you had spent all of your high commission month’s pay. I got laid off more than once throughout that career, but between my stockpile, unemployment insurance, and my savings, it was hardly a blip on the radar. When you know (or at least suspect) it could happen, you can calculate your income over the course of a year and see if it’s worth sticking with that job For me, it was. For some of my co-workers who did not have these things to rely on, the instability was devastating.
- When my father passed away – After numerous trips to help out my mom during Dad’s illness, a broken sewer pipe destroyed my basement back home. I had just been temporarily laid off again. Initially, all was well because the insurance company took care of everything. At the same time, my premiums skyrocketed (at that time, in Canada, there was no legal cap on how much they could raise your rates all at once, and they based the rates on your financial situation. They decided that since I was unemployed, even though I’d never missed a payment, that I was high risk and my premiums were raised to a point that they were higher than my mortgage.) I entered one of the worst financial points in my life. I lost a lot of material thing, including my house and my car. I sold off everything I could to support my family and we made some dramatic lifestyle changes.
- When I got downsized, permanently – Something a lot of folks have seen over the past decades is that businesses are hiring younger, less-experienced people who don’t demand a high salary and commission point. When I was offered a buy-out, I knew the handwriting was on the wall. I took the money and added it to my emergency fund and decided that it was time to get into a new line of work. I was only 40, but had hit the peak of what other people were willing to pay me and as the automotive industry continued to careen downhill, so, too, would my career. My emergency fund allowed me to take a year off of working outside the home to start a writing career as long as I moved someplace dirt cheap and lived frugally for that year.
- When my oldest daughter went to college – Regardless of my own financial situation, I was adamant that my kids would start life without the college debt that shackles most young people today. Through my daughter’s hard work in earning a scholarship, her tuition was paid. Her summer job paid for her spending money, I paid for her living expenses, and a few dips into the fund paid for her books.
- When I moved to the US to take a promotion – The company I did some freelance writing for offered me a raise and promotion if I was willing to relocate. They weren’t offering moving expenses but the opportunity was too good to pass up. Also, I was thrilled since I’d wanted to leave Canada and come back home for a while. Thankfully, my emergency fund allowed me the freedom to make the 3000-mile journey and relocate without too much financial stress.
- When I branched out and became completely self-employed – Once my books started bringing in regular income, I was able to leave my job and work strictly for myself. The cushion provided by my emergency fund made the leap a lot less scary.
- When the septic system of our rental home went kablooey – Imagine the scene. We got home after being out for the day and our house smelled like a Porta Potty at a music festival on the equator. In revulsion, I walked through the house to the bathroom, where, a few inches of raw sewage were on the floor after overflowing my toilet and bathtub. We had to grab a hotel room (paid for by the landlord), drive back and forth to care for our livestock (not paid for by the landlord), and eat out (also not paid for by the landlord.) When we discovered it could take more than a month to get the matter resolved, we had to move ASAP. While we weren’t charged rent and we got back our deposit, moving is still expensive and we had to get our things out of the house before they were ruined by the sewage issue.
- When my youngest daughter required emergency dental surgery – We don’t have dental insurance but dental emergencies don’t care about that. Recently, my daughter’s orthodontist spotted an issue with her wisdom teeth that signaled they needed to be extracted immediately. Since no one takes payments anymore, I was fortunate that I was able to pay the $3000 bill. (Her grandparents also kindly contributed some toward the surgery since we had just relocated for her to start vocational college.)
- When my dog had a veterinary emergency – Recently my dog managed to rip out his stitches after being neutered, despite his gigantic Cone of Shame. (In a move that was as smart as it was dumb, he pushed the cone against a chair and managed to maneuver it down enough that he could reach his boy parts.) We had to rush him to an emergency vet clinic to stop the bleeding, get new stitches, and treat the developing infection.
- When my windshield had to be replaced – A few months ago, I got a stone chip in my windshield repaired and all was well. Unfortunately, due to a super hot day, the stars aligning, or some kind of missile-guided second stone hitting the exact same place, the chip turned into a crack that spread all the way across my windshield in a day. The replacement was less than my insurance deductible, but still quite a chunk of change.
- When Kid #2 started secondary education – Having some extra money on hand means I can buy her $500 supply kit for vocational school without any kind of panic. I can also give her a debt-free start in life, just like I did for her sister.
- When life just happens – When you look at all of this stuff together, it probably sounds like I have the worst luck on the planet. Not really. Furnaces stop working in the middle of winter. Cars break down when you are far from home. Jobs are lost. Kids get hurt. People die. These aren’t outrageous things that only happen to the rare individual – I’ll bet nearly everyone reading this can relate to some or all of these ordinary mishaps.
For some folks, none of these things would cause financial stress. Maybe they have an excellent, secure job and a year’s worth of savings in the bank. Maybe they inherited a lot of money, just sitting there like the most luxurious velvet cushion. Maybe they are living a charmed life in which bad things simply never occur.
But most of us aren’t living that life. While perhaps we aren’t living paycheck to paycheck, we still have to be careful with our money. When something happens that is far outside our normal budget, it’s an emergency. How major or minor that emergency is for you depends on how well you have prepared yourself financially.
Here’s how to build yourself some financial security, regardless of your income.
These steps can help you create a more financially secure life. Each step has a link to more information.
- Live beneath your means – not just within them.
- Reduce your fixed expenses wherever possible.
- Get out of debt as fast as you can. The snowball method is a proven method that anyone can use.
- Build an emergency fund.
- Create an emergency food pantry.
- Make frugality a joyous way of life.
- Don’t be afraid to make radical lifestyle changes.
- Work on your self-reliance skills.
- Spend some time acquiring extra money to put toward your personal financial plan.
What about you?
Have you ever had a situation during which your emergency fund helped you out? Share your story in the comments below.