Last week, we had a sick puppy on our hands. A VERY sick puppy. He was vomiting, not eating much at all, and very listless. He ended up spending all day at the vet’s office and then we ended up twice to the animal hospital last week, too. While it was stressful enough just making sure he was stable, it was definitely a shock when I got the final vet bills!
Thankfully, we had an emergency savings account in place that prevented a stressful situation from becoming even more stressful. Over time, I’ve become such a believer in keeping a small emergency savings account, so I thought I’d share a little bit more about why we have one, and how we have it set up.
Why do I need an Emergency Fund?
You might be sitting there smugly going, well, I don’t have a dog! So that’s how I’ll avoid emergency vet bills! Fair enough, but the truth is at some point, all of us are going to face some unforeseen event. It’s just part of life!
Have you ever had one of the following happen to you?
- Car problems
- Medical emergency or health-related issues (yourself or a member of your family)
- Unexpected house repair
- Emergency travel needs (e.g., you need to attend a funeral a few states away)
- Traffic ticket or other fine
One of the biggest takeaways I got out of Dave Ramsey’s Financial Peace University was to just plan that unplanned stuff will happen. (And particularly so if you have other financial goals such as paying off debt or saving money – Murphy’s Law, right?) Here’s how Dave puts it:
This beginning emergency fund will keep life’s little Murphies from turning into new debt while you work off the old debt. If a real emergency happens, you can handle it with your emergency fund. No more borrowing. It’s time to break the cycle of debt!
To be clear! This is a small emergency savings account, to get you out of small unforeseen pickles (like the vet bill we had, or if your tire blows). While I do think it’s also important to work towards bigger savings (for say, an unexpected work layoff), it’s a great starting place to have that $1,000 in the bank. Having it there means you’ll have a little more peace of mind the next time an unexpected rainy day arises!
How we manage our Emergency Fund
I have a confession to make: I’m a notoriously bad saver! That might surprise you, but it’s the total truth. We have a savings account (in fact, several of them) with our primary financial institution, but I found it was just too easy to transfer money to our checking account from our savings account. I realized that I needed to have the money accessible – but not too accessible.
So here’s what we did. A few years ago, we opened an online savings account with Capital One.
I have LOVED having our Capital One 360 savings account. It was exceedingly easy for me to register the information from our primary financial institution so I can transfer money between the accounts. In fact, I have loved it so much that I set up savings accounts for each of our kids as well as another savings account to set aside money for taxes.
I really can’t stress enough how effective it’s been for us to have our emergency savings (as well as additional savings) NOT at our primary financial institution.
How do I fund my Emergency Savings account?
Dave Ramsey recommends having a $1,000 emergency savings and I generally agree with this number. However, given all our liabilities (house, two older cars, and now a dog!), I’ve decided it might be wise for us to up this closer to $1,500 or even $2,000. On the other hand, if $1,000 seems like more than you can do – remember, that anything you can set aside is better than nothing!
Here are a few ideas for funding a small emergency savings account:
- Sell something. Got a bike you no longer use? How about some video game equipment? Clothing? Or maybe some baby clothes you could sell at consignment?
- Work overtime. If you have a job that has overtime opportunities, consider picking up a few extra hours.
- Adjust your budget. Can you reduce spending on eating out, entertainment, or clothes shopping for a few months?
- Tax return/unexpected monies/gifts. Consider setting aside some money from your tax refund or holiday bonus towards your emergency savings.
- Build it over time. Set aside a set dollar amount per month or paycheck until you have the savings in place.
As for us, we’ve taken the last approach. For the last couple years now, I actually have scheduled a recurring, automatic transfer to coincide with my husband’s payday. This is extremely easy to set up on Capital One, if you end up going that route:
The money comes out right away, and it has been a simple, painless way to grow our savings. It’s amazing too how even small, consistent amounts can add up! This is how we’ve managed to fund our savings account. (Incidentally, the amounts and dates/frequency can easily be changed around in Capital One. You can also make additional transfers on top of the recurring ones should the need arise.)
If you are seriously considering opening a Capital One Savings Account, I’d encourage you to also consider opening a Capital One Checking Account. Both accounts are totally free!
And, in case you’re wondering about the puppy? He’s much on the mend and even managed to perk up for a 20 minute walk around the neighborhood!
Now it’s your turn: I’d love to know your thoughts on having a small emergency savings plan in place. Have you ever had to use it? Any additional creative ways for funding it? Please share!