Starting and Maintaining an Emergency Fund

If you know me in real life, you know I'm very involved in tracking the money we spend, moving funds around, and maintaining seven different bank accounts.

No joke. Seven. Plus a CD.

Having so many accounts helps me separate and track money used for different purposes. One of our savings accounts is our "emergency fund."

I think an emergency fund is one of the most brilliant idea ever concocted. Funds go in and DO NOT GET TOUCHED, except in the case of an emergency, obviously.

Now, "emergency" can mean different things to different people. For some, it may mean "replacing the water heater" or "medical bills" or "my husband lost his job and I need to buy groceries."

For me, emergency means "I have NOTHING left." That is when I will dip into our emergency fund.

Popular recommendations are to have enough money in an emergency fund to cover 3-6 months of typical living expenses. That's a lot.

Not everyone has $10,000 sitting around they can just stick into a savings account and never touch. I don't. So here's what I do: I set up automatic deposits on a monthly basis, where my bank transfers $100 on the first Monday of each month from our checking account to our emergency fund savings account. That's it. That extra $100 a month adds up over time. I started this about the time we got married and right now we have enough in our emergency fund to cover two months of living expenses, easily. Three months if we were tight with it, which we would be, since it would be all the money we had left to our name.

Setting up and maintaining an emergency fund takes time and patience. Making monthly deposits is, for me, easier than throwing a big chunk of change in there and knowing I can't touch in. Somehow, I just don't miss $100 a month. The trick is to not dip into the account when you want to buy something fun. Since we started our emergency fund, we have never made a withdrawal, and our balance is slowly, but surely, climbing.

My goal is to have enough money in our emergency fund to cover six months of living expenses, easily. At that point I will stop depositing money and the funds will sit there, until such a time they need to be used. Hopefully never. Then when we die our children can inherit them.

So, if you don't have an emergency fund, there's no time like the present to begin!