Change the Way You Think about Emergency Savings

Emergency (noun) – a sudden, urgent, usually unexpected occurrence or occasion requiring immediate action.

Here’s the thing about emergencies: you can’t plan for them. Not really. Life is filled with too many variables to ever properly plan for any one specific emergency. But just because you can’t plan for an emergency, doesn’t mean you can’t prepare.

A 2014 study from Bankrate.com found that 26 percent of Americans don’t have an emergency fund of any kind. An emergency fund is one of those things we all generally agree we should have, but mostly ignore when we’re trying to make do on a tight budget.

That’s understandable. The idea of building an emergency savings account is pretty daunting when you’re already struggling to make ends meet. You look at the amount you’re supposed to have saved (3 to 6 months’ worth of expenses!) and you’re defeated before you’ve even started. And even if you can find some money to set aside, the fact that this money is earmarked for emergencies only (which are pretty much exclusively no fun to experience) makes motivation difficult.

But maybe we’ve been thinking about emergencies the wrong way.

Emergencies in all shapes and sizes

By definition, emergencies are unexpected and require our immediate attention, but when we think about emergency saving we’re often thinking about catastrophes. Enormous emergencies. Life-changing events.

In reality, most of the unexpected financial setbacks we face in life are relatively small, but when we aren’t prepared they can feel Earth-shattering. When money’s tight, a blown tire or a broken window can seem completely unmanageable. In those moments, you don’t need thousands of dollars – you just need a little flexibility in your budget.

If you feel completely unprepared for any sort of unplanned financial deviation, consider implementing some of these changes to your emergency savings philosophy.

Just save – Rather than creating a separate emergency savings account, just focus on saving as much as you can. Don’t think of the money you’re setting aside as “rainy day” money. Think of it as “any day” money. Allow yourself to use some of that saved money on personal goals, like vacations or important purchases, but leave the rest untouched and available for the unexpected.

Understand the outer limits of your budget – If you trimmed your budget all the way down to only the most essential parts, you’d be living a pretty spare existence. That might be difficult to maintain on a monthly basis, but in an emergency situation it can be incredibly handy to know how to immediately reduce your expenses to their absolute minimum. Experiment with your budget by focusing on one particular category at a time and attempting to minimize your spending.

Focus on stability – It’s a hard feeling to describe unless you’ve felt it yourself, but when you’re on the financial edge, any little setback is absolutely crushing. When you’re not on the edge, though, those same little setbacks instantly fall back into proper perspective. A big emergency savings account is definitely great protection against major setbacks, but your first and best defense against the unexpected is smart, steady money management. By maximizing your income, minimizing your expenses, and making thoughtful, informed decisions about your money every day, you’re much better equipped to roll with the unexpected challenges life sometimes throws your way.

You can never really know what kind of trials and tribulations you might soon be facing. If you aren’t quite prepared for a total financial fallout, don’t panic! Rather than worry about the dedicated emergency savings account you don’t have, focus on the small changes you can make every day to strengthen your personal finances. Just like a healthy body is better able to fight infections, healthy money management gives you the best chance to quickly and painlessly overcome the unexpected.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.