How do I build an emergency fund when I keep having emergencies?

Do you have money tucked away for a financial emergency? How about just a small emergency, say around $1000? You know, like if your washer/dryer combo finally breathes its last breath or you accidentally back your car into that cement pole in the parking garage?

While these aren’t exactly “emergencies”, many of us still can’t afford to deal with them. A recent study found that 69% of Americans have less than $1000 in savings1. Perhaps even more surprising was that this lack of savings seems to plague people of all income levels. Nearly one quarter (23%) of people making $150,000 or more also had less than $1000 set aside for an emergency1.

But regardless of your income, this can be a real problem. Because every time one of these inconvenient minor emergencies pops up, it sucks money away from the savings you should be keeping to protect yourself from those, “Oh no, this is a really big freakin’ problem” financial emergencies.

So for many of us, it might be helpful to reconsider our definition of “emergency”. For example, you really shouldn’t be using money from your emergency fund for things like dishwashers and snow tires. An emergency fund should be set aside to cover unexpected events that cause serious financial stress. These could include:

  • Job loss
  • A medical emergency
  • Unplanned travel expenses
  • The death of a family member or close friend
  • Large, unexpected home repairs

“If you are having difficulty keeping money in an emergency fund you may need to assess where that money is going and then save for those expenses in addition to your emergency fund,” says Marcy Musselman, Financial Coach with Foresters Everyday Money.

While replacing your car tires or paying a large annual property tax bill can put a strain on your budget, these expenses should not be considered emergencies. You know you will need to pay for them at some point in the future, Musselman explains, it is just a matter of when.

In order to better plan for these costs, add up all the periodic expenses that are causing you to dip into your emergency fund. These could include:

  • Standard car maintenance
  • Standard home maintenance
  • Quarterly or annual tax and insurance payments
  • Gifts for birthdays and holidays
  • Clothing purchases

Divide that amount by 12 and set this money aside into a periodic savings account each month. This account should be used instead of your emergency fund to cover these expected expenses.

Then once you have savings set aside to deal with those expensive inconveniences, you can focus on building your real emergency fund. How much do you need to have in there? Well, another study reported that the average cost of a financial emergency for most families was $20002, so that might be a good place to start.

The truth is, like almost all financial issues, the amount of savings you should have is different for everyone. Some experts suggest having three months of expenses saved. Others will say six or more. To find out what makes sense for you, set up a chat with a financial agent or advisor so they can help you build savings for both the “big” and “small” emergencies in your life.

  1. Survey: How much money do you have saved in your savings account: GoBankingRates, 2016.
  2. Survey of American Family Finances by Pew Charitable Trusts, 2016.

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Eric Tyndale

Eric has an extensive background in content marketing and professional writing. He loves to write about personal finance and life insurance issues for the Lifenotes blog because he enjoys the challenge of making complicated topics fun for readers! Eric also covers community outreach initiatives.