emergency Archives - Our Bill Pickle

Three reasons $1K is not enough for an emergency fund

Saving an emergency fund was the first things we did when we started paying back our debt.

The concept made a lot of sense to me: an emergency fund creates a cushion in your budget that helps you avoid accumulating more debt when unexpected situations arise. Sign me up!

But when I set out to start saving, I quickly realized there are very different opinions about the right amount to have in your account while you’re paying off debt.

For many, $1K is the standard and I can understand why. Keeping your emergency fund small means more money is available to pay off debt. More money to debt means you pay off the debt faster. It makes sense.

But, as the title suggestions, I don’t think $1K is enough for an emergency fund.

How big should your emergency fund be?

If you have debt, you should also have an emergency fund.

Why? Because life happens.

Still too vague? Here’s an example.

That is a picture of one of our tires. And that little silver circle is a nail. Ugh.

Buying new tires for the car was not part of our plan this summer, but it’s not like we had much of a choice. Not only is it unsafe to drive around with a tire that can’t hold air, we also had to put the car through inspection – and it would not pass with a tire like that.

Annoying? Yes. But thankfully, not a financial disaster — because we have an emergency fund.

Most people in the personal finance world agree that having an emergency fund, particularly when paying off debt, is a good idea. Even though there is less agreement on the amount, most tend to agree it’s a good idea to have some money set aside just in case.

How much should you have in an emergency fund when you’re in debt? And how do you go about saving that money? Here are four simple tips for building up your emergency fund (and some thoughts on how much you’ll want to be putting away).