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Why Having An Emergency Fund Is Important

Updated: Feb 21, 2020

Building up an emergency fund is key when managing your finances and planning for unforeseen expenses that need to be handled immediately.  If you have debt, expert Dave Ramsey recommends that you try to put aside at least $1,000 in an emergency fund while paying off your debt.

How to Build Your Emergency Fund

Depending on where you are financially, you may be thinking that saving up even $1,000 is impossible, but there are ways you can. Think about selling things online, skipping your morning Starbucks stop in favor of the office Kurig, or picking up additional projects and odd jobs to stack up your emergency fund.

There are also savings apps such as Digit, SmartyPig, etc. which automatically deduct tiny, almost imperceptible amounts of money from your bank account that can add up big over just a few months!

Emergency Fund is for Protecting Against Unforeseen Emergencies

So now that you’ve learned how to build an emergency fund, you may still be wondering why it’s so crucial.  The primary function of your emergency fund is to protect you in the face of emergencies. Losing a job, being saddled with large medical bills, or having your car break down are all very serious emergencies that could incur additional debt if you are not prepared.

Protecting yourself by having an emergency fund will help to ensure that these already extremely stressful situations do not become a long term problem.

When to Use Your Emergency Fund

Ask yourself these three questions before deciding to tap into your emergency fund:

  1. Is this unexpected? 

  2. Is this urgent? 

  3. Is this needed?

If you answer yes to those questions, you are likely looking at a situation that requires use of money from your emergency fund. You do not want to begin “pinching” from your e-fund for expenses such as groceries, vacations or shopping sprees! Remember this money has been set aside to protect you against situations that are costly and negatively impact your life. Your emergency fund is not play money!


For help managing your business finances, check out our services page.  Desnoyers CPA, is an accounting firm that offers a wide range of services for business owners. Check out our monthly blog and join our mailing list to get more information for small business owners seeking experienced financial advice.


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