Back when my wife Shan and I were first married we both didn’t understand the importance of having an emergency fund. We actually had never even heard of the term!

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image of coins being saved for an emergency fund

Later on, we were fortunate enough to learn from Dave Ramsey the importance of having an emergency fund. During times like the 2008 economic recession and COVID-19, many people lost their jobs and emergency savings would have helped lots of people in need.

CNCB states only 39% of Americans can afford an extra $1000 to put toward an unexpected purchase. If you haven’t already, it is a good time to put aside some extra money for these unexpected purchases.

An emergency fund isn’t just in case of losing a job but applies to other big and sudden things that happen in life.

For example, if your car engine breaks down or if there is a sudden home repair. An emergency fund gives us peace of mind.

Just imagine having enough money in a specific account for all types of emergencies.

What is an Emergency Fund?

An emergency fund is a separate savings account you’ve specifically set aside to cover or offset life’s unexpected events. Like a broken car, job loss, or sudden illness.

It shouldn’t be used to buy a new car, vacation, Christmas gifts, etc. Instead, the money in your emergency account should only be used for real unexpected emergencies. The cash is easy and quick to access and will cover the emergency cost.

Why Do You Need an Emergency Fund?

For us, the reasons for having an emergency fund are because unexpected emergencies always happen.

Having emergency savings can give us more peace of mind and the ability to deal with those unexpected emergencies. The money is also easy to access and is stable in a savings account.

How Much Should You Save in an Emergency Fund?

There are three different situations/categories:

  1. Posses debt (expect house mortgage)
  2. No debt
  3. Retired folks

First, If you have debt (except house mortgage): we recommend first saving up $1000 in your emergency fund. Then we recommend using the debt snowball method to pay off all your debt except the mortgage.

Related content: See how we paid off $56,000 debt using the debt snowball.

If you fall in the second category, congrats!! Paying off all your debt except your house mortgage is a huge feat!

We highly recommend those in this category start saving a 3–6-month fully-funded emergency fund.

This means if you lose your job, you have a 3-6 month fully-funded emergency savings account to pay all of your bills and living expenses such as house mortgage payments, rent, food, etc.

We personally prefer having a 6-month fully-funded emergency account which gives us greater peace of mind.

If you’re trying to decide how much to save in your fully-funded emergency fund, there are several factors you should consider like job stability, any medical issues, or other factors.

If you fall into the third category, first off congrats!! We hope you are enjoying an amazing retirement life!

For those retired, having 2 years saved in an emergency savings account should be sufficient. Because when the next recession or stock market crash hits, there will be enough money in the account so that no money needs to be taken out of retirement investment accounts.

Instead, you will be able to wait until the stock market recovers. 

Where to Put Your Emergency Fund?

We have an emergency fund and keep it separate from our regular checking and savings accounts. The emergency money is put into a high-yield savings account.

We recommend NOT putting your emergency fund into an investment account(s) since you will need quick access to the money.

When to Use The Money in Your Emergency Savings Account?

Don’t use the money in your emergency savings account to buy wants – that new TV can wait! 🙂

Instead, use emergency funds for a legit unexpected emergency. Job loss, broken A/C, etc.

As adults, we should all hopefully know what a real unexpected emergency is.

In Conclusion

In conclusion, taking the time to prepare and save up an emergency fund is really important.

Just imagine when losing your job or having the water heater go out, you will have enough cash to cover all those unexpected emergencies.

This feeling is unmatched and also really good for your mental health and relationships.

Start saving now even if it’s a little by little.

We currently transfer $400 a month to a High Yield Saving Account which is our designated emergency fund. We will keep transferring money until we hit our 6-month fully-funded goal!

Related Content: How we budget our $100,000 annual household income

We would love to hear your experiences when saving up for or using an emergency fund – feel free to drop a comment below!


We hope the information in this article provides valuable insights to every reader but we, the Biesingers, are not financial advisors. When making your personal finance decisions, research multiple sources and/or receive advice from a licensed professional. As always, we wish you the best in your pursuit of financial independence!