Top 10 Reasons Why You Need an Emergency Fund

You’ve heard all the pundits in personal finance extol on the fact that you need to have a emergency fund. I’m not going to preach to you about how much you should have, or where to put it. Instead, I want to give you some food for thought on why you need one, and maybe you will consider it.

reasons for emergency fund image

1. Your Car Breaks Down

You never know when this could happen – you cruisin’ down the freeway and all of the sudden you lose power. You have to get a tow to your local shop, and find out your transmission is shot and it’s going to cost you $1,000! I hope you have it.

2. You Lose Your Job

While the economy has gotten a bit better, it is still a tough job market and companies are struggling. If you lost your job, it may take you months to get another. Can you pay the bills?

3. Your Spouse Loses Her Job

If you have a two income family, could you make it on one income alone if your spouse lost her job? If not, I hope you have some savings.

4. Your Dog Eats a Rock

We all love our pets, but sometimes they do some stupid things. If your dog ate a rock and you had to take it to the emergency vet, could you afford the obligatory $2,500 vet bill?

5. Your A/C or Heater Dies

Right now, for most of the country, we are blasting our air conditioners because it is hot and humid. A/C repairs can easily cost $100s of dollars, so if yours doesn’t work, are you going to fix it or suffer through. And now is the time to start thinking about winter…is your heater going to make it through?

6. You Get Sick

The cost of medical care keeps going up. Even if you have insurance, have you looked at what your potential out of pocket maximum is each year? You could afford the potential $5,000 medical bill if necessary?

7. You Don’t Want to Ask Your Parents for Money

If you find yourself short on cash, do you want to go back to your parents and beg for money or a loan? Maybe if you are 2 months out of college, but for most, the answer is no!

8. You Don’t Want to get a Payday Loan

If you’re short on cash, do you want to turn to a payday lender? Does the thought of walking up to a random store in a strip mall for cash bother you? Then this may encourage you to build up a savings.

9. You Don’t Want to Pawn Your Stuff

Have you watched an episode of Pawn Stars? You’re probably not going to get that much money for your stuff, so it may be a better investment to not buy stuff, and save instead.

10. You Want to Ignore The Pundits

Do you never want to have to listen to Suze Orman’s advice again? Then just build an emergency fund already!

Picture by FreeDigitalPhotos.

About the Author

By , on Sep 1, 2013
Andy Tenton
Andy is a 30-something New Yorker who turned his financial life around. He took charge of his finances, got out of debt, and is now working his way toward financial success. He is the publisher of

How to Become Rich e-Course

Budgeting 101


  1. Don’t forget #11… Having cash in the bank for emergencies (or for the security it brings) FEELS GREAT!

  2. We don’t have an emergency fund, just liquid/accessible savings. Most people do not save enough and I think being reminding frequently of things that might happen is an excellent idea.

  3. My friends dog ate the aluminium foil that had been used to cook a joint of meat.
    It bust his emergency fund out of the water – but so what – we all love dogs.
    The same dog jumped up at the barrel of a gun, at the same time as the trigger was being pulled. It got part of its nose shot off.
    Its one hell of a dumb dog – but everyone loves it.
    I love the fact that my friend has the sense to have an emergency fund, maybe he should get a separate one – just for his dumb dog

  4. Re: #4-been there done that. Like when your cat decides to stop drinking water and can’t pass urine because he’s pissed off at you (no pun intended). Pets are a huge expense. If you don’t have an emergency fund you shouldn’t have pets. You never know what’s going to happen to them, or what they’re going to eat or drink (or not drink in my case).

  5. It’s amazing, when I didn’t have an e-fund I feel like emergencies happened constantly. Now that I have one? Nothing. Nothing is an emergency anymore.

    Losing a job scares me a bit. My emergency fund is relatively small ($1000) because I still have debt to pay off.

  6. Liquid says:

    If you say Pawn Stars with a British accent it’ll sound like you’re saying something else lol. Access to money in emergency situations is critical. I exactly have an EF right now but I’ve built up enough equity with my assets to access liquidity at any time.

  7. The budget and the EMERGENCY FUND are the two most mportant components of a financial plan. Without these in place, it is difficult to attack debt, save, or invest without putting your family at risk. I have counseled numerous families who have made decent money but failed to build an emergency fund. When life happened, their financial world became stressed. Then they think their financial crisis was because of a job loss or a bad investment when in fact it was because they did not have an emergency fund to catch their slack.

  8. Having access to cash in the event of an emergency is a great idea that everyone should follow – rather than a designated emergency fund I have a savings account which offsets the interest payable on my home loan. This means that rather than earning interest (which I would be taxed on) I can instead reduce my mortgage expenses. The funds are accessible at call and more than enough to cover any emergency that arises. It’s unfortunate that US banks don’t offer such an account, I believe the UK might also have them though?

  9. Just about every one of those things has happened to me; both with and without an emergency fund….with it went a lot better 🙂

  10. Catherine says:

    I can totally relate to all of this, we’ve never had an emergency fund rather relied upon cash flow allocated to other things (missing a utility sort of thing) or family. We’ve just started our Efund and have 40 bucks so far, it’s a start right? We both have secure jobs in fields with a lot of security so we’re lucky there but we’ve had our fair share of vet visits, our cat is a ticking time bomb (she has IBS so flares up all the time) and although we have a new vehicle, when one thing goes wrong shit hits the fan, we just found out we need new rear brakes. whoo. Good post!

    • Andy says:

      Catherine…yeah, getting on a budget and finding a way to build up that emergency fund is extremely important. Even if you only have $40, it’s definitely a great start!

  11. You’re trying to tell me I won’t get $25,000 for my collection of 200 Pokemon cards? I seriously loved reason #9!

    I really like your take on this article. We hear all day “Save this much in an emergency fund,” “Save your emergency fund here,” “You need THIS much, etc. etc.” – I like the idea of WHY. There are countless reasons why each of us needs to have an emergency fund, and I really like how you compiled this list.

    Also, asking your parents for money (or any family/friends for that matter) is just horribly awkward and usually ends up as a bad experience. Yeah, I’m totally speaking from personal experience here.

  12. RichUncle EL says:

    I agree with the emergency fund necessity, but many Americans do not. The last time I researched savings info Americans currently save about 1% or less. I think emergency savings should be automatically taken out of paychecks and rolled into the savings account in a cash fund to make money accessible to help with emergencies. Another systematic help that may improve our society and lead us further towards governement interference with our money.

  13. Getting an emergency fund is one of the few start choices I made when I started college. I still have it to this day. Luckily, I’ve had some of these random things happen; I haven’t needed the emergency fund to pay for them, but everytime something weird comes up, I love that I do not lose sleep over them.

  14. Modest Money says:

    All very good reasons to have an emergency fund. You definitely don’t want to be turning to some extremely high interest loan option if you are in a pinch. Even though I don’t believe in having a big stash of cash available, I do keep a small buffer in my bank account for this kind of stuff. I just prefer to have money elsewhere for bigger emergencies so that I am not missing out on too much interest.

  15. Andy Hough says:

    Most of those things have actually happened to me. I’m going without an emergency fund for a short time while I’m paying off my van. As soon as it is paid off, my first priority will be to replenish my emergency fund.

  16. Ethan says:

    Good article. Items 2 and 3 (job loss) look like the major risk to me!

    I don’t necessarily have an “emergency fund” but have an “emergency plan” to ensure that I could cope for at least six-nine months in the event of losing my job.. This takes into account redundancy payments, cash deposits at bank and the fact that I would need to cash-in my investments. I don’t include bank overdraft limits, which the bank will remove if you lose your job.

  17. Haha, I’d say the majority of things on this list have alreday happened to me and my wife and having an EF saved our as*es! Our last dog didn’t eat a rock, but she did eat a razor blade. Oddly and fortunately, nothing came of it, she was perfectly fine. STomach of steel I guess?

  18. CF says:

    We haven’t really had to dip into our emergency fund yet (knock on wood…) but it’s so valuable to have it there. We expect to have to use it at some point to replace a fridge or make condo repairs. We have a cat as well, and although he doesn’t eat rocks, he is getting old and I expect him to start having health and dental issues in the next few years.

  19. Michelle says:

    I so thought you were joking with the rock-eating dog part, but no….I guess that probably does happen pretty regularly with dogs. I agree with all of these what-ifs! Thanks to a great money month, we were able to get our e-fund back up. BTW, speaking of rock-eating dogs…I decided I really really really want a labradoodle! I just have to convince Jefferson, Mr. Analyze EVERYTHING! Hope you and Holly are having a great weekend, Andy!

  20. Add your dog having severe allergies to that list. We won’t be dipping into our emergency fund for it but it will still cost us hundreds of dollars for the allergy testing and treatment… ugh!

  21. Ha – I could see my dog eating a rock and it costing me $2500. Good points. I don’t think a lot of people consider their loved ones losing a job, or the thought of getting sick or hurt. There’s just a lot of good reasons why you need to have extra money on hand.

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