The Savvy Scot

Personal finance and lifestyle blog

$100 Cash Giveaway – Emergency Funds Save Lives

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OK so that title was a little bit of an alarming title, but I am going to summarise something very important for you over the next few paragraphs. When someone talks about an emergency fund, what do you think of? Do you think of it as a savings account that you need when you are a grown up and have kids and a house, cars, furniture, pets etc? I often did. I thought of it as being something I would have when I had real responsibilities.

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BULLSHIZZLE!

An emergency fund is something we should all have! It is not something for another day, or something for someone else. Emergency funds should be relative to your situation and should account for what unnecessary expenses could arise in your unique life.

An emergency fund doesn’t have a defined amount. Where £5,000 may be adequate for a young family to cover any unexpected bills / situations; £800 might be enough for a student backpacker traveling the world over summer – enough for that emergency flight home. £10,000 might not be enough for a family of 5 living in central London in a £1m house – that would barely cover a months outgoings!

Although slightly extreme, the point I am trying to make is as follows: You have to define how much money constitutes an emergency fund for your own situation. Don’t get bogged down by bloggers arguing if 10K is enough… this is totally irrelevant to you! Nobody can give you generic advice. The fund size is dependent on so many different variables –  your mortgage cost, job security, debt, outgoings, plans, ambitions etc. The one thing that you need to realise is that you need something!

Personally, my Emergency Fund target is at around £5000. Our standard outgoings are around £2500 a month and assuming the worst case scenario that I lost my job (the higher earner), £5000 would be enough to cover the loss of income for a few months and would provide enough of a buffer to live off and travel to interviews etc. Absolute worst case scenario, we lose both our jobs at the same time (extremely unlikely) we would have enough to cover bills for 2 months.

That said, I don’t intend to put £5000 into a savings account where it would earn little interest, but rather have that sort of money easily accessible across a wide-range of low risk investments.

Another reason that I think people are put off creating an emergency fund is that they think of it sitting there frozen – doing nothing.. almost a waste! Instead, think of an emergency fund as a buffer across your portfolio.

OK, enough of the lecture – now it is time to enter the giveaway folks! $100 up for grabs:

 

a Rafflecopter giveaway
 

Let’s assume that you win the $100. You will obviously put $50 in an Emergency Fund after reading this, but What would you spend the other $50 on? It has to be entirely selfish! GO

Good Luck! – You can find out more about taking part in future giveaways HERE.

 

Lovely comments

  2. Budget and the Beach says

    I used to use it a little recklessly when I first started freelancing, but I’ve been way more careful now, and usually use it to cover things like rent/car/or medical if that situation comes up. I need a lot more in mine to feel comfortable because as a freelancer my income can vary so much. I need to be more protected.
    Budget and the Beach recently posted..November GoalsMy Profile

  4. thestarvingartistcanada says

    I don’t really have an emergency fund per-say, but I do maintain a sufficient amount of “buying-power” to cover any emergency (real or imagined) in my margin account. (Yes I borrow to invest… wag your fingers all you want, but this is how the rich get richer)
    thestarvingartistcanada recently posted..RESP confusionMy Profile

    • thestarvingartistcanada says

      And of course, I forgot to say what I would spend it on… NOTHING! It would go directly into my margin account. I might use for sundry purposes or it might get rolled into my next equity purchase. Or I might just go buy a reasonable bottle of single-malt… I’m down to a measly assortment of 11 different scotches. Time to add a couple more to my collection.
      thestarvingartistcanada recently posted..why I don’t like bondsMy Profile

  6. Vicky says

    I do have a decent chunk of money in cash doing nothing, but my situation is a bit unique as I need it for living expenses. 🙂

    Well, the boy has recently boasted that he can do 10 Big Macs at one sitting, and I call BS, so we might have to settle this once and for all with the other $50. 🙂

    Thanks for sponsoring the giveaway!
    Vicky recently posted..October 2012 Spending Plan ResultsMy Profile

  7. Joe's Sustainable Portfolio says

    Well, my Emergency Fund is an amount that I earn in a year before tax. I generally keep a third in spare current account so I can get to it instantly. However, the other two third is in index-linked saving certificates so they will keep their value over time. The reason why it is there is similar to you, just in case of losing my job or sudden unexpected cost. Of course, no matter how bad my portfolio get, my emergency fund is still there!

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