Life throws us curve balls when we least expect it! Thinking back to the recent 2020 COVID-19 Pandemic, life changed drastically in the blink of an eye. Even in the day-to-today, it is common to experience unexpected trials such as car breakdowns, unexpected medical bills, and family emergencies. Having an emergency fund is just one way to alleviate the stress that comes along with unwanted situations to protect you and the ones you love. And while it may not be the most important financial goal you have, the importance of this fund at some point in your life is unwavering.

You may be asking, “What is an emergency fund?”. These are funds set aside for unexpected life situations. Common questions that can be asked are “How much is enough?” and “How would I go about creating this fund?”. While there is never a perfect answer as everyone and every situation is different, there are some tips in creating and managing a successful emergency fund.

“How much is enough?”

This is different for every person; therefore, is important for you to understand your risk tolerance as well as how you are going define your emergency fund. If you are more risk tolerant, your emergency savings may be a little smaller, and if you less risk tolerant you might have more than the “recommended” amount set aside. It is also important to list the sole reasons that you will use the funds; the fewer the better. This is because it is easier to be tempted to use the funds for non-emergencies than one might think. But, either way, a good rule of thumb is to start small. Whether this is a couple hundred dollars, or a set part of your paycheck after each pay day, anything is something until a plan is set into place. Many professionals recommend saving 3-6 months of pay to be covered in case of loss of job or for funding unexpected situations. If you really don’t know where to start, you are in luck. The internet provides several automatic calculators of what a sufficient amount may be for you. Here’s one you can try (at bottom of webpage): https://www.nerdwallet.com/article/banking/savings/emergency-fund-why-it-matters.

“How would I go about creating this fund?”

Having a plan is key to success. Step one is to create a goal that is realistic for you and your circumstances. This can look different for everyone. The next step is to create a system that helps you monitor and fund the account. This could be a direct deposit each paycheck or even setting money aside from other areas such as an unexpected gift or salary increase. It is key to take advantage of these opportunities. Checking this account often is also important to make sure you are headed in the direction you want to go. It is important to place these funds somewhere in which you won’t be tempted to use them for everyday expenses such as a separate savings account with a high interest rate and easy access for when an unexpected emergency does come up.

Deciphering what is right for you may take some time and energy but will be worth it in the end. And once you hit your goal, you do not need to keep depositing money into that account! Don’t be discouraged if you are currently living paycheck to paycheck. Instead talk with a NEXUS Coach or other financial professional who can help you get started. If you aren’t ready to take either of those steps, even setting aside 1% of your earnings will add up, and your future self will thank you for it!

While life is uncertain, and we cannot control all the details, one thing we can be sure of is a God that never changes and never stops working. Hebrews 13:8 says, “Jesus Christ is the same yesterday and today and forever”. This alone allows us to have peace through the unexpected, but this does not mean there aren’t ways we can contribute to God’s best and take care of the blessings He has given us in ways such as an emergency fund. Proverbs 21:20 states, “The wise store up choice food and olive oil, but fools gulp theirs down”. Therefore, let’s be sure to manage what God has given us for His glory!

Sources:

Burnette, Margarette. “Emergency Fund: What It Is and Why It Matters.” NerdWallet, 2 Aug. 2022, https://www.nerdwallet.com/article/banking/savings/emergency-fund-why-it-matters.

“An Essential Guide to Building an Emergency Fund.” Consumer Financial Protection Bureau, https://www.consumerfinance.gov/an-essential-guide-to-building-an-emergency-fund/#anchor_how-do-i-build-an-emergency-fund.

Kurt, Daniel. “Emergency Fund.” Investopedia, Investopedia, 12 Aug. 2022, https://www.investopedia.com/terms/e/emergency_fund.asp.