5 People Who Need an Emergency Fund

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I honestly believe that everyone needs at least some form of an Emergency Fund. If you are a follower of Dave Ramsey and you have debt to payoff, you might be on the bandwagon that advocates for a mini emergency fund of $1,000 until your debt is paid off, and that’s fine as long as it works for you. But the important thing is that you have at least some emergency funds for life’s unexpected events, and that you eventually contribute more to it down the road. After all, $1,000 won’t get you too far if you have a true emergency.


I’ve met a few people in the personal finance world that don’t think some people really need a 3-6 month emergency fund for various reasons or they believe that investing their emergency fund in short-term investments in the way to go so they are earning money on their money. Personally, I don’t think this is a wise idea for most because emergency funds should be as liquid as possible in case you need to access them with very short notice in an emergency.


If you have doubts about whether or not you need an emergency fund, see if you fit any of the categories below. These 5 people definitely need an emergency fund.


The Car Owner

Don’t even get me started about what percentage of the times I’ve had to access my emergency fund were for my car. Car troubles are one of the main reasons people need an emergency fund. Cars are essential for many people to get their jobs so they can continue to earn money, but they are still a nuisance to own sometimes. They are constantly needing upkeep, maintenance, and occasionally repairs.


You need to budget for car upkeep, maintenance, and some repairs in your regular budget if possible. Believe it or not, tires do go bald and brakes wear out over time! But on top of that you should always have an emergency fund to go along with the obvious. Your alternator is going to quit on you when you least expect it, or you may wake up to a tree that fell on your car and now you have to meet your auto insurance deductible. No one thinks it could ever happen to them until they wake up with a tree on their car 🙁


The Home Owner

Similarly to owning a car, if you own a home you need to have a line item in your regular budget for things like upkeep and maintenance for your home. These things could consist of new air filters for your home, grass seed for the back yard, a drywall repair kit or even a new garden hose.

Contrary to popular belief, buying a new couch or digging a new pool is NOT AN EMERGENCY. They may feel like an emergency when you return from the Jones’s Backyard Oasis, but these are nothing more than an “I want it right now!” Think of emergencies as the broken hot water heater (average $600 to replace), the broken water line (your insurance deductible), or the garage door motor that quit (average $400). These are the things that we cannot exactly plan for, however we are proative and plan anyway via our emergency fund.

Another thing to keep in my mind is many emergencies can be covered under $1,000 if you are aDIY kind of person. However, if you weren’t born with the handyman gene, or your A/C unit needs replacement, $1,000 simply won’t cut it. 

Note: Chris Peach recommends a $1,000 – $2,000 starter emergency fund for this reason. If you are renting, you could lean on a the lower end, however if you are a current homeowner, lean closer to the $2,000 end.


The Single Person

Single people are in a unique financial situation that can make an emergency fund even more important than for dual income couples. This is especially true for the single person who relies on only one source for their income. This fund can be used to tide them over if they suddenly lose their job and sole source of income, or if they become sick or injured and are unable to work. In these instances, a $1,000 mini emergency fund will likely be used up quickly. So it’s important to build up a starter emergency fund of $1,000 – $2,000 to get your through your Debt Payoff, and then fill up your 3 – 6- month emergency fund as quickly as possible.

Why the 3 – 6 Months?

You may be wondering why 3 – 6 months? Great question! 3 – 6 months is a range because not everyone is the same. I base the 3 – 6 month rule on a few key life circumstances:

• Your Job

• Rent vs Own

• Uniqueness – Medical, Special Needs, etc.

If you are a school teacher with a steady paycheck every two weeks and you are renting a one bedroom apartment, you are probably going to only need a 3 month emergency fund. On the other hand, if you are a homeowner, and you’re income comes from commission only sales, then you may want to lean towards a 6 month emergency fund. Chris Peach uses a 4 month emergency fund because he is debt free (not including mortgage), he is a firefighter in a large city (steady income), and his wife is in Corporate America (less steady).


The Retiree

Once you hit retirement, you no longer need an emergency fund since you have your retirement savings, right? Wrong! You should never count your emergency fund as part of your retirement savings and you should still maintain the fund no matter your age. Health problems are more likely to arise in later years and an emergency fund can be a good way to help cover those costs if you have no other option. It’s not surprising that your later years will be medically the most expensive. With that said, the number one cause of bankruptcy is from medical expenses. Have an emergency fund of 3 – 6 months, or at least the size of your max out-of-pocket expense you have with your health insurance company. Retirement is supposed to be stress-free, right? Keep it that way with an adequate sized emergency fund.


The Self-Employed

Being self-employed is a whole other topic, because self-employed people often have an irregular income that they have to budget with. But this doesn’t exempt them from needing an emergency fund. If anything, it actually makes an emergency fund all the more important.

I suggest having an emergency fund for traditional emergencies; home repair, the unexpected car that falls on your car, and medical emegencies. In addition, the self employed need part of their emergency fund to act as an income buffer to help make up for low income months in the future. Even if you live on last month’s income, having a buffer of money to add when you have a low earning month will be very reassuring.

While everyone should have an emergency, these 5 particular groups of people should make building and maintaining that fund even more of a priority on their financial checklist. If you’re like me, you might even qualify under more than one category. I am a car owner, a home owner, a single person, and I’m self-employed, so I know that having an emergency fund is very important to my financial security.

Do you have an emergency fund?

Kayla Signature


  • Everyone needs one. 🙂

    But I like how you explain the case for each one, it’s very helpful to think of the potential emergencies and shape your plan accordingly.

    • I totally agree that everyone needs an emergency fund! I think the people listed in the post have a case for needing one all the more. 🙂

  • Hi Jim,
    I just read this morning that every single American will have a large financial hardship every 10 years. Insurance companies use actuarial tables to determine risk potential and frequency of claim occurrences. When you choose to have an emergency fund, you are choosing to insure yourself against the statistic I mentioned above. No one is immune to financial hardships – you may as well be prepared.

    • Great statistic Chris! Thanks for sharing that. You are right that financial emergencies (hardships) are basically a given that will happen at some point. Although we never know exactly when they’ll occur or what form they’ll take, we can plan for them anyway by having an emergency fund.

  • Everyone needs one. We have one and when I lost my job earlier this year we did not panic because of the cash saving we had.

    • I totally agree! I’m glad you have one when you lost your job. I can’t imagine going through that without an emergency fund. Yikes!

    • Brian,

      The difference between losing your job with and without an emergency fund is your posture after the blow. With an emergency fund, you aren’t in panic mode and you can find the next job you WANT verus one you simply need to put food on the table. Thanks for sharing 🙂

  • I’ll add one more.

    The Dad.

    Once I became a father, I realized I would do ANYTHING for my children, and wanted to make sure I was financially able to do so if needed. Add to that Life Insurance as well!

    • Excellent addition! I didn’t even think of that one. (Probably because I don’t have kids.) It makes total sense to me that parents need to have an emergency fund for child-related emergencies, and yes, life insurance is a great idea too!

  • Great post Kayla! I agree with Jacob that parents should definitely be on the list too. Kids can be pretty expensive and the more people in your family the more often you’ll experience things like a medical emergency.

  • I think everyone needs an emergency fund. I’ve had one since I started college and it’s always been pretty useful. I’d also say to increase your emergency fund every month. It always makes me feel more relaxed knowing that I have an emergency fund. Knowing that it grows over time feels even better. I didn’t have the 3-6 month rule, but now that I think about it, it probably took me about that time to fill it up again.

    • Yes, I agree that you should have an emergency fund and add to it each month, at least until it reaches the point that it’s full at 6 months’ worth of expenses.

  • Definitely! I sleep way better at night knowing that I have some money in my savings account in case of an emergency.

  • I’ve been following you on twitter and have started to read your articles on here recently. I have a question for you. So, I have the car paid off, an emergency fund for it and an additional emergency fund for my house. I have these in savings accounts that have jack for interest. My friend suggested I put most of my savings into something like a Vanguard index fund so that it makes more money than my savings but could still have access to it within a couple of days in an emergency. Could I get your take on this if you have a moment? I’m a bit gun shy as a single person taking that chunk of money and putting it into a fund.

    • Hi Deb!

      I am going to advise you to NOT put your emergency fund into any sort of investment. Here is the reason: Your emergency fund needs to be as liquid as possible. I always tell people that you need to have access to all of it in 30 minutes or less. If you needed access to your money during an emergency, you would have to sell off your shares from your Index fund and wait for the money to get to your account. Secondly, think of your emergency fund like you would an insurance policy. Insurance costs you money to protect you and your assets. By keeping your emergency fund extremely liquid (30 mins or less) it is technically costing you money because you could be sticking that money in something that would return you a much better return than a pitiful interest rate on a savings accounts. The point of an emergency fund is you need it NOW. Great question! 🙂

  • So, basically everyone needs an emergency fund! I couldn’t sleep at night without mine. I like knowing I have the cash to handle anything that pops up. Having rental properties means we need to have a bigger cash e-fund than most people. You never know when you’ll have to replace something randomly – like when we were on vacation this summer and I had to replace an AC and furnace for $4,700 and pay over the phone. That hurt.

    • I do think everyone needs an emergency fund, but there are probably some (rare) people who don’t fit any of the categories on this list. Even then, I still think they should have an emergency fund in place. Now that I have one I can’t imagine not having one for any reason.

  • Yes all good points you make here, EF is a must in the personal finance arsenal. I lean more on the 4 month as well, but 1 month is better than none. So I suggest you get saving asap, before that emergency hits.

  • Yes, I absolutely agree that an emergency fund is the key to staying out of consumer debt–forever. If you own a car, it will break and eventually need to be completely replaced. Everyone gets sick sometimes & incurs medical A. These types of “emergencies” aren’t really surprising at all so why wouldn’t we save for them?


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