Why Emergency Savings Matter More Than You Think
We’ve touched on emergency savings in previous posts, but one question always comes up:
“If I can use a credit card or take out a loan, why bother saving for emergencies?”
Let me answer with another question: If you’re already dealing with an emergency, does adding debt sound like a good idea?
Borrowing money has a cost—interest, fees, and stress. Emergency savings act as a financial buffer to protect your long-term plans when life throws the unexpected at you, whether it’s a car repair, medical expense, or job loss.
What Emergency Savings Should Cover
Your emergency savings aren’t a catch-all. They’re for needs, not wants.
Here’s what to include:
✅ Car breakdowns
✅ Medical emergencies
✅ Sudden home repairs
✅ Pet emergencies
Avoid dipping into this fund for things like a new TV, vacation, or impulse purchases—those should be planned separately in a “fun fund.” Emergency savings are for sudden, unavoidable expenses.
How Much Should You Save?
A general rule:
3 months of expenses if you’re single or dual-income with no dependents.
6 months of expenses if you’re the sole provider or have dependents.
To calculate, focus on necessary expenses:
Groceries
Utilities
Minimum debt payments
Housing costs
Exclude non-essentials like streaming services, gym memberships, or dining out. Emergency savings are for survival, not lifestyle maintenance.
The Problem with “Oversaving”
While having no savings is risky, too much in savings can also hold you back. If your expenses are $3,000/month, keeping $40,000 in cash is excessive and loses value to inflation. Beyond your emergency fund, excess cash should be working for you in investments or other growth-focused strategies.
Emergency Savings Protect Your Financial Plan
Your investments thrive over time—selling them in a pinch can reduce returns and expose you to unnecessary taxes and penalties, especially with retirement accounts. With an emergency fund:
You avoid liquidating assets during market dips.
You protect your long-term growth.
You reduce reliance on high-interest debt.
The Bottom Line
Emergency savings are your financial safety net, ensuring life’s surprises don’t derail your long-term goals. They’re not flashy or exciting, but they’re essential.
If you’re ready for guidance on building a financially secure foundation and ready to move towards a future of generational wealth and stability - let’s connect. I can help you in every step of your journey, at any stage. Book a call as the first step towards securing your prosperity.