Why You NEED an Emergency Fund!

Why You NEED an Emergency Fund!

If you had an emergency, and needed to come
up with $400 right now, could you do it? Shockingly, nearly half of Americans said
they couldn’t. Which is another way of saying that nearly
half of Americans have no financial flexibility or freedom. While it might not be the flashiest or most
exciting financial goal, an emergency fund is the foundation your entire financial health
is built upon. Without it, it’s just a matter of time before
an unexpected jolt causes a crack that will eventually bring the whole house down. We recently asked you, our amazing Two Cents
community, to share your real-life stories about how an emergency fund or lack thereof
has impacted your lives and you really came through! So let’s learn from each other what not
having savings is truly costing you and pick up some tips for finally making it a reality. Rose and her husband were in the military
making decent money as she finished up college. Unfortunately, they didn’t see any real
need to save any of it. So the day Rose was supposed to leave for
a study abroad program, her husband totals their new car on the way to the airport rendering
them both carless AND cashless. So what if you found yourself in a similar
situation? How much money could you save by having a
proper emergency fund if your car decides to kick the bucket? I think it’s time tooo… Run the numbers! Let’s assume you are…for lack of a better
word…average. Most people, when buying a car, buy used with
an average purchase price of $20,084 dollars. You’ve also got the average american credit
score of 673 and want to the most common car loan length of 72 months. Running this scenario through a
big-named bank gave me an APR estimate of 7.94%. That means you’d potentially be paying a
gob-smacking $5,000 in interest alone over the lifetime of that loan. If you or they had had even a little bit of
an emergency fund, you could have potentially afforded a shorter loan term, gotten a better
interest rate or maybe even skipped out on interest all together and just bought a cheaper
car in cash. All of which could have saved you hundreds
if not thousands of dollars. Another common unexpected expense you guys
talked about were house repairs. Poor Brianna and her husband woke up on one
of the coldest days in winter with flames shooting from the back of their furnace. Thankfully they had the $3,500 in savings
to keep frostbite at bay. But what if they had approached it like most
people would and put those repairs on a credit card? Treating your credit cards like an emergency
fund is like trying to use one of those weighted work-out vests as a life-jacket. With the average current credit card interest
rate at 19.24%, financing a vital repair like that could have cost them an extra $673 dollars,
even if they managed to pay it off in one year! That number could have easily climbed into
the thousands if they stretched it out over a few years. But the lack of an emergency fund can cost
you more than money. After a year of battling an illness, one of
our Youtube community members, “Almostlindsey,” ended up needing an emergency surgery. Thankfully, she had decent health insurance,
so it shouldn’t have been a big deal. The problem was she’d already used up her
sick leave at work! So the time she’d be spending in the hospital
would also be “no-paycheck time.” Without emergency savings and no access to
credit (because of her lack of income), she was forced to beg friends and family to help
her cover her basics like rent and food until she could get back to work. She recalled the whole situation being both
stressful and humiliating and has worked hard to save up a cash cushion in the time since. Then there’s Ashley who said having an emergency
fund may have saved her life. She had a suspicion that she might be suffering
from sleep apnea but quickly learned that the testing and equipment involved wouldn’t
come cheap. She said that having her emergency fund gave
her the confidence to schedule an appointment with her doctor. And thank goodness she did. Turns out tests showed her hunch was correct
and that the lack of oxygen during sleep had been significantly taxing her heart. Thankfully, she told us that after six months
of treatment, she’s doing much much better. Now I’m sure you’re thinking “I get
it Philip and Julia I need it…but how do I get one?” Here are our favorite three tips to start
laying down your financial foundation — the right way. TIP ONE: Pick a SPECIFIC number. Most experts agree that a fully-funded emergency
fund should have between three and six months of expenses. This number isn’t just based on bills and
rent, but also flexible expenses like groceries, medications and transportation. That is typically enough to pay deductibles
on your health or auto insurance and could also potentially handle a major transition
like a sudden move or a critical home repair. TIP TWO: Get Organized! Now that you have a savings target in mind,
set your money for this goal apart in some way. If your savings for emergencies, a new phone,
and your brother’s bachelor party are smashed together in a general “savings” bucket,
you’re sabotaging yourself! Get clear on what money is for true emergencies,
and give it a special home. TIP THREE: Sprint! Sometimes, to get something you’ve never
had you’ll have to do something you’ve never done. Try challenging yourself to a spending freeze. Cut back on every non-essential expense and
hustle for any extra income you can for just ONE month. Seriously, cancel all your subscriptions,
tell your friends you’re sorry you can’t go see the new Marvel movie, and read comics
at the library instead. Remember, it’s just for 30 days! See how far you get towards your goal. Then maybe take a week or two break to catch
your breath, go out for a nice meal or two then hit it hard again until you’re done. Now, congrats for making it all the way to
the end of the video because we’re going to share a powerful little secret with you:
saving up for an emergency fund requires you to be intentional, focused and to live below
your means. Which are the exact same financial muscles
it takes to ultimately build wealth. So when you’re finally done with this goal,
awesome! Take those mad money muscles you just earned
and use them to build something amazing on top of the foundation you just laid down. And that’s our two cents. Thanks to our patrons for keeping Two Cents financially healthy. Click the link the description if you’d like to support us on Patreon.

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100 Replies to “Why You NEED an Emergency Fund!”

  1. This is 2019 America. There is no emergency fund big enough that the working class can save that will prevent what’s coming.

  2. Got let go from my job recently but had an Emergency fund for 3 months to cover me while I get my CDL. Make sure you build your 3-6 months worth of Emergency Fund people! You’ll sleep so much better at night!

  3. so i put my big expenses on a credit card.. but IMMEDIATELY use my emergency funds to pay it off.. for those SWEET POINTS LOL

  4. How depressing for yanks they need an emergency fund to go to the doctor because they think they’re going to die…

    Viva la NHS.

  5. financial discipline doesn't come easy. Especially in today's world where everything is instant. Even when my significant other and I agrees on the financial goal we want to achieve, we still have to try pretty hard to stay on track. It is sometimes hard to see your friends wasting money on boutique coffee shops when you are making your own. Until you see your bank account and realize that although you aren't living flashy like they do, but you are on your way to achieve your financial goal.

  6. I sprained my ankle and cried in the ER because of all of the work days I would miss. My husband whispered in my ear, “don’t worry, we got this. “ our saving covered half of our bills and had us in a much better place then if we didn’t. So grateful to have had enough until I could go back to work! Be prepared for the unexpected so we it comes, AND IT WILL, you will be ready! 👍🏽

  7. I think I have the opposite problem. I have enough saved up for like 3 years and it's just sitting in a checking account. I should probably invest it or keep it in high interest savings account.

  8. Most Americans “are broke as hell”… if you can’t afford a $400 emergency, start your own business!!! If you’re gonna be broke as a joke, don’t go make some rich mother fucker millions of dollars… make money for yourself! Sometimes you got to work overtime. Sometimes you got to clean some toilets. Sometimes you got to say sorry when you don’t mean it. But do it for yourself instead of a bitch ass boss who will not pay you what you’re worth. You set your own price what you’re worth. You can wash cars. All you need is water, a bucket, towels and soap. You can buy that shit at the dollar store. The rest is your time which you should invest in your own business as opposed to Walmart or target or Kmart or Walgreens or McDonald’s or burger king or Pizza Hut, or Amazon, or grocery stores etc… fuck those crooked ass companies. Make money for yourself. go research the local laws do you don’t get fined. Get an occupational license. Get the supplies you need. And go to work when you want to work. When you have money, if you like making pizza, them open your own pizza shop! Working an odd job to begin because it’s cost effective is not embarrassing.

    Strippers work for themselves and make bank. YouTubers like these two same thing. House keepers, janitors, etc…

    Don’t work for crooked ass companies. Work for yourself and if you still can’t save $400 for an emergency then you only have yourself to blame. I started my own company 10 years ago and believe me, you’ll never want to work for a bitch ass crooked ass company again. I made something like $15,000.00 a year working part time and going to school part time, I didn’t have $400 back then. But after I started my own company, man… i don’t worry too much about the next paycheck anymore.

    $400 ain’t that much money. If you don’t even have that for an emergency, you’re a bitch ass slave. Don’t be a bitch ass slave. Go work for yourself. I would set the bar for emergency to $10,000.00. You should have that much, AT THE VERY LEAST, in the bank for emergencies. $400…. that’s only good enough to rent a cockroach infested motel room for a week… no food included. What you gonna do after that? Sleep under a bridge, that’s what… go make money for yourself!

  9. Emergency funds are for more than just paying off unexpected bills. I recently found myself in an extremely toxic work situation. My mental, physical, and emotional health was all suffering because of it.
    Thankfully, I had been dilligently saving up my emergency fund over the last two years. I had accumulated over $15k, which was more than enough for me, a single person living alone. I woke up one day and it literally hit me; no amount of money was worth that lifestyle. Panic attacks the moment I got home from my 12 hour days, stifled tears in the bathroom when I couldn't make it the full day without having an emotional breakdown….
    My emergency fund became my "bail out of a terrible situation" fund. I ended up spending about 5k total to find a better job across the country with better pay and a tenth of the amount of stress as my old job, for significantly less required working hours.

    Emergency funds can help you dodge bullets without breaking a sweat. I can't emphasize enough how grateful I am to have gained this knowledge (and to have taken action) earlier enough in my career to be able to get out of that place without having to rely on anyone else for financial support. I am much happier today.

  10. It took a lot of hard work but we know how an emergency fund for 2,000. That's not much but it came in handy when me and my husband couldn't work for a few days because our apartment flooded and we had to save our stuff. We had to pay someone to watch the dog, get our stuff out, and sadly eat out quite a bit. But we still made it.

  11. Keeping an emergency fund with 4-6 months worth expenses allows you to take risks and act on opportunities that you normally would never take. Starting an emergency fund has truly changed my perspective and has improved my life 🙌

  12. Use credit cards as debit cards reap in the rewards and if it's cash back then use that money towards your emergency fund

  13. Question!!!!! ✋
    Ok so I have my emergency savings to cover me for 3 months. Where am i supposed to keep it ???????

  14. Honestly, capitalism is bullshit. Emergency funds are bullshit. You shouldn’t die because you can’t afford to live, you shouldn’t freeze because you can’t afford warmth, you shouldn’t starve because you can’t afford food

    I get that there is good advice to surviving the capitalist hellscape but the real problem is systemic, not with average individuals

  15. The company I work at allows me to split my direct deposits by percentages. So I have it set up to put 20% into a savings account and the rest into a checking account every pay period. The nice thing about it is that I don't have to figure out an exact amount to put into savings and any raises I get will automatically put more into my savings.

    I keep hearing a good rule is to have six months of salary stashed away. I want to try to have a little more than that (maybe a whole year even) and then turn that 20% to something else. Like an index fund or IRA.

  16. Great video as always! Another great thing about emergency funds is that they help you build wealth indirectly. If you're investing your hard earned cash, the last thing you want to do is sell unexpectedly to cover an emergency!

  17. Not having an emergency fund is like driving a car without a seat belt, even if you do things carefully on your own sometimes trouble will find you and you end up with more damage than could have been prevented.

    Safety and prevention are too important to be ignored.

  18. I love you guys so much. I feel like you really care and are giving me information I should've been given in public school! <33333

  19. Are stocks viable as emergency fund, they are quite liquid (assuming you have a couple years expenses worth of ETFs)?

  20. During one of the hottest days of this year, in the pittsburgh area, our fridge kicked the bucket 2 days after going food shopping. Noticed it when I got home from work after all our food was spoiled or close to being. Since i had my emergency fund, i was able to buy a new fridge, fully stock it the next day and eat out with my girlfriend and our kids till the fridge arrived the next day. So glad i smartened up and started saving.. turned a $1,200 emergency into a fun day shopping for a new fridge.

  21. This is a bit of a silly idea, but i'd like to hear your views on buying lottery tickets and what you would hypothetically do if you won the lotto. Keep up the good work!!

  22. The only time I've had to use an emergency fund was when my grandmother passed away. I pulled the 400 bucks out and flew home the next morning. Emergency funds are the best

  23. My friend and I were just talking about emergency funds. Her stove went out and she is stressed. She thought it was wild that I had enough in my e-fund to replace a stove. We both have the same job and earn similar. Her husband makes more then mine so they should be able to sit money aside.

  24. I personally live on half of my paycheque and everything goes into savings. I recommend this to everyone because you become truly free and can sleep well at night. Nothing can stress me right now – not even losing my job.

  25. Maybe the fact that 40% of Americans cant afford a 400 dollar emergency shows that the problem isnt a lack of savings but capitalism. The 25 richest families in the world own together 1.4 trillion dollars in wealth. These families over the course a year increased their wealth on average by 24%. That means the average increase in wealth of each family was 10 billion dollars. The capitalist system we have makes the richest people grow their wealth faster then everybody else. The wealth inequality keeps getting worse so maybe we should focus on the real root of the problem, a system that produces ever greater extremes of wealth and poverty.

  26. By the way, spending $20k on a car and taking a loan for it is such a horrible idea. Only thing you should take loan for is house. Buy a car which costs $10k. Anyone should be able to save that money within a year or two.

  27. I always say, learn to do with less. There are so many products and services you just don't need! Many are NOT necessities! The key word is necessities. Search out alternates for every non-essential. You'll be amazed when you begin to see that what you thought you needed….You really didn't.

  28. We regularly rack up $2-4 grand on our credit cards in groceries, utilities, and other regular expenses each month. 
    Shocking, I know.
    But then we pay it all off at the end of the month. 
    Even more shocking, I know.

    Our cards give us cash back, so I am actually paying LESS than I spent in the first place.
    This goes into the emergency fund!
    In other words, if we spend $3,000 on our credit card, then get a $40 credit on that bill, we pay off the credit card using that $40 ($2960), but then take $40 from our bank account and invest it.
    So now we have $40 making interest in an investment which can be used in an emergency. If we do this every month, that's $480 making us money each year.
    Not only that, but since our bank account still goes down by $3,000, we don't think we have "extra" money, so don't go spending it on something else. We stay in budget, make money, and have a good emergency fund for future issues.

  29. I'm quite shocked that this isn't common sense. My minimal financial saving goal is to save up three monthly loans for an emergency fund.

  30. As an avid "6 month" saver and general financial literate person I love to see your videos confirm what I assume is good practice.

  31. Still gets weird for me the fact that you have like a limited numbers of days you can be sick at work there in the USA.

  32. emergency funds are so important. My dog swallowed an upholstery staple he found under a chair and I didn't know it. A few days later he kept getting sick and I had to take him to the vet. It ended up costing a little over $3k for vet bills and the surgery to get it out. I had some, but had nowhere near that amount. My parents helped cover the other part of it, but I don't know what I'd do if they weren't able to help.

  33. Getting there, getting there… I'm so impatient for these things, I wanted to start with forex and the stock market but I'm glad I slowed down and got down to an emergency fund because I could have lost the little money I have saved.

  34. One big thing I noticed once I got an emergency fund, is the overall stress relief. Financial hiccups become and "oh well", rather than a total disaster. I can live everyday without that worry.

  35. US Public School System: *refuses to teach financial literacy*
    Me: Fine, I’ll do it myself… *binge watches Two Cents*

  36. I recently took out a mortgage on my first home and the conversation went:
    Lender: You have $0 liabilities
    Me: Yes
    Lender: You don’t owe any money for anything?
    Me: That’s correct
    Lender: Okay that’s about a 1 out of 100 where we approve a loan like this.

  37. Relevant data suggests: You need to calculate your monthly expenses, then add 20%. Multiply this by three, and that's what you should have at all times in cash or in a bank account

  38. Follow Dave Ramsey plan, save $1,000 then use a money market to grow your 6 month emergency fund. Don’t keep it tied up in a CD, where if you needed it, it would cost you fees for take it out. Plus money markets generally have a return rate of 3% compared to CDs which is usually between 0.05-1.5% .

  39. I would love love love to have an emergency fund built but I'm already in debt, it's hard to balance both paying off debt and saving.

  40. I love your show. So much so that my wife groaned at me for watching this video while laying in bed. Are there any ice breakers for talking to some one who's less than enthusiastic about finances?

  41. This is such a great channel one of the few im subscribed to and that should be shown is class rooms in school always appreciate the info <3

  42. I love how most of the Two Cents video can be so depressingly scary and motivationally aspirational at the same time!

  43. Common length for car loan is now 72 month? I first car loan in 2005 was 60 months, but I never stretch out my loan that long. I usually pay off before or by 36 months.

  44. I'm in the Coast Guard and everyone was freaking out back in February when the government shutdown happened and we weren't going to get paid for a few weeks. I actually save money and was fine, but everyone I worked with was apparently living paycheck-to-paycheck. Like come on, you're adults with children, you can't go one month on savings?…

  45. I have had an emergency savings fund for about six months now. Good thing too! Two months in and the transmission of my car seized up. I had the cash to get it replaced by a friendly mechanic in just a few days, and still had money left over. After that I replenished the fund. I am currently putting money away so that I will have enough to cover six months expenses. Should be there soon! And I keep it all in a high yield savings account so that my money is at least not devaluing due to interest.

  46. Imagine having money left over after expenses instead of being in more debt than the previous month. God I'm hungry.

  47. western consumerism tells you spend all your money because……#YOLO.
    well…how is #YOLO gonna help when you can't pay the bills, rent, about to be homeless while piling debt at a enormous rate?!? 🤦🏻‍♂️

  48. I did some light reading on this subject a while back. Been saving money for an emergency fund since.
    I made up my mind that I have to save at least something, even if it´s just 5 bucks.
    Keeps me in the habbit of saving and every cent counts, I guess.

  49. I love the analogy that using a credit card as a emergency fund is like using a weight jacket as a life preserver 🤣🤣🤣🤣🤣🤣🤣

  50. In Australia if you're 14-24 years old you can get 3.15% interest on bank of Queensland's fast track starter account. Can withdraw any time, and no account keeping fees. Perfect for emergency funds up to $10,000.

  51. Having to unpaid sick leave should be a human rights violation. And 20% credit card interest! Seems like you need an emergency fund just because the system is broken.

  52. Having an emergency fund doesnt mean its cash under your pillow that doesnt grow. It means to have it where it is easily accessible too. I would suggest 1 month of cash at home, 2 months of cash in bank and 3 months of cash in something flexible like a bank fixed deposit, insurance investment schemes, index funds, these take around a week or 2 to process and take out but the money at home and bank should tide you though at least 2 months, which is more than enough time for the money to come back to you. And having to do the process of withdrawling would help make one think. "Would I really need it?" Most people cant save up an emergency fund cause its too easily accesible, " I can save up again later, i could use the money to buy this first!" is what cause many people to fail.

  53. if you strive for just one thousand dollars emergency fund, that's less than $20 per paycheck in a years time. You could include your emergency fund into your debt snowball to get there faster and after you reach one thousand then you can go back to normal saving amounts to keep it going.

  54. I have this issue: I invest all everything that is left from my salary, leaving me with less than a 1000 bucks in an emergency fund. I just can't save money, knowing it will just sit there and be eaten by inflation. Would you please advise me?

  55. The best thing with having a emergency found is also that the money work for itself. Just learn the basics or stock investing and you're good for life. The emergency found will turn into a nice retirement plan eventually if you do it right.

  56. English isn't my first language but I hope my question gets understood. An emergency fund a bank account with cash or an account with bonds? How quickly to get a hold of? Likein the hour? Next day? 2-3 days?

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