How Big Should Your Emergency Saving Fund Be

A Californian financial education company reported that only four out of ten women have emergency savings. Let’s change this! It’s about personal responsibility and safety, not about the grim statistics.

Like all financial matters, determining how big your emergency fund should be is tricky because it depends on the factors specific for each of us.

Your Immediate Living Circumstances

Are you still enjoying the warmth of your parents’ nest? Are you blessed with a loving and sharing partner who also works? Or you live with your boyfriend, but pay all the bills because he’s still a student? Living on your own? Raising kids? All these lifestyles require completely different approaches to emergency fund planning.

In case you’re the only bread winner under your roof, the safest amount is the one which would cover an entire year’s worth of bills and other basic expenses. Living and sharing expenses with a partner allows for more modest personal savings which would cover all regular expenses for up to 6 months. Naturally, if you have kids the overall sum should be exponentially larger. Average annual costs per child are approximately $3500, excluding health insurance and dental plan. These cover childcare, education, clothing and other regular costs like recreation and sports activities.

If you haven’t been doing it up to now, start an expenditure log to get the exact sum of money you typically spend within a month. Then simply multiply this figure by six or twelve to get the total amount of your optimal emergency savings fund. This is still a rough estimation, so keep reading for all the other factors which will determine the final figure for you.

Keep Healthcare Out of the Calculation

The one thing you don’t want to cover with your rainy day savings is medical emergency. This is where your health insurance steps in, so keep it up even in periods of financial hardship. Set some time aside to study the individual and family dental plans available, because these also shouldn’t be included into your saving fund.

You can always work part time like a babysitter or an online administrative assistant for example. It would provide for health insurance, with your emergency saving fund intact, while leaving enough time for family, house work and even for that dream job search.

What about all the Nice Girly Things?

Naturally, when determining how big your emergency saving fund should be, you want to keep it as low as possible. This fund is for emergency only, so don’t count in the luxuries you are normally used to, like weekly trips to the beautician, hairdresser, eating out on regular basis and exotic vacations. Of course, it’s important to look good in case you lose your job because it will keep your spirits up and you will glow at job interviews. Still, in a financially tight period, you know you can keep up most of the beauty routine at home with wisely chosen products.

The same goes for the gym. If you’re a regular at an expensive health club, consider making a couple of months’ break and go jogging instead. Indoor types can have fun and save their emergency fund by exercising at home along free online videos ranging from aerobics to yoga.

So When Do I Start Saving?

Start right now. The five or six-figure amount you’ve calculated may seem terrifying, but there’s no need to panic. Even if you’re just out of college, it’s not early to start saving for a rainy day. It’s never too late either! The secret is to start with a tiny amount which will feel most comfortable to put aside, like $20 a week, or a rounded sum of $50 bi-weekly. Just keep the funds away from your hands, because sooner or later we all get tempted.

Open a savings account aside from your regular debit bank account, and ask your banker to make these small, regular deposits automated, transferring the chosen amounts into your emergency savings account. This way you won’t have to think about building up the emergency fund, but do raise the amount you put aside whenever possible. Compare the available saving options and go for the one with nice interest rate which will additionally enlarge your emergency fund, while making it readily available when needed.