• Emergency Fund as Self-Insurance (and Giveaway!)

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    emergency fund

    Ours is locked up more securely.

    In eight years, we have been extremely lucky in that we have never had to tap into our emergency fund. As such, it’s a been a while since I’ve actively thought about it. There’s a myriad of ways that our emergency fund helps us on our path to financial security. We see it as a form of self-insurance, in that it helps us to avoid financial catastrophe should an unplanned unfortunate event happen to us. Here’s some of the ways that we’re protected.

    Income Replacement

    We’ve both been happily employed at our jobs for eight years. While we’ve both had some scares of layoffs, we’ve both been lucky and have avoided cuts. We can’t always depend on luck to keep saving us, so we’ve built up a cash cushion to replace our income should we find ourselves unemployed. This is obviously the main use of an emergency fund, but it also has other, indirect uses.

    Credit Score Protection

    By having a cash supply to fall back on, we’d be able to pay our bills on time, even if that means we pay only the minimums. Credit scores are becoming increasingly important, not only for getting good rates on home or auto loans, but also for insurance rates and even to determine whether you get a job. Even paying one bill more than 30 days past the due date can have unforgivingly deliterious effects on credit scores. It would be such a bummer for one late payment to ruin years of building good credit. (By the way, we use Credit Karma to monitor our credit score – here’s our review of Credit Karma and you can sign up for Credit Karma here!)

    Ability to Keep Moving Forward

    If one of us were to lose our jobs, we would be job searching full-throttle in order to fill the income gap. Having an emergency fund would allow us to concentrate mostly on finding a new job that suited us, and not having to get a job in the meantime in order to make ends meet. This way, we can allocate all of our efforts into finding a long-term solution for employment, which in the long run will allow us to build our financial resources even further.

    Ability to Seize Oppotunities

    Once in a while, I like to imagine that I’d come across a business opportunity that I couldn’t pass up, but would be very risky. By having an emergency fund, I’d be able to pursue (with the ok of the spouse, of course) an opportunity knowing that the financial impact would be minimized. In realty, the best opportunities that have come up so far are fantastic sales that we couldn’t pass up. Either way, having the emergency fund allows us to take advantage of opportunities while minimizing our risk.

    Peace of Mind

    The most important asset that an emergency fund brings to us is peace of mind. Just knowing that we would be able to tackle life obstacles without major financial distractions allows us to sleep much more soundly at night. We already have a lot of stress on our plates and it is a relief that we don’t have to worry about what will happen should one of us lose our jobs.

    Do you have an emergency fund? In what ways are you protected by having one?

    image: Tax Credits


    We’ve partnered up with SavingsAdvice.com to offer you the chance of winning $100 through PayPal or as an Amazon Giftcard. This is a great way to start or supplement an emergency fund. Entering is easy – all you have to do it like our Facebook Page. You can get additional entries by doing any of the other activities. That’s it! The contest is open until November 10. Good luck!

    If you are a blogger and would like to participate in future giveaways, click here.


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