The importance of an Emergency Fund might elude some of you, but let me tell you it is critical. Years back before the economy took a dive and unemployment was low, it was okay to have three months of expenses in an emergency fund. In today’s economy and with the extremely high unemployment, you need at least eight months’ of living expenses in your emergency fund.
In 2010, 15 million people were unemployed and 9 million had to make due with part-time employment. For those who had eight months’ of living expenses in an emergency fund and found themselves without a job, they were able to live off that fund. Hopefully, they have been able to find a job and are back on their feet and replenishing their fund.
Can you imagine what it was like for families who had little or no savings in their emergency funds? Desperation set in rather quickly. They began living off of credit cards. Most of those who did not find re-employment quickly, probably maxed out their credit cards, borrowed money from friends or relative, lost their homes, had to go to the local food banks to feed their families, etc.
Do you see why fully funding your emergency fund is crucial? It gives you a cushion, peace of mind, and it keeps you and your loved ones safe.
We don’t know when the economy will turn-around. We don’t know when unemployment will drop down to low levels. Every day we hear that this or that state is running out money. Our nation had to raise the debt ceiling. The bottom-line is that America is broke. That’s B.R.O.K.E. broke! America is living off of credit, savings bond, t-bills. When will jobs return? When will we become a thriving nation? I don’t know. What I do know is that for those of you who are employed, you need to fund that emergency fund. You need to learn to live below your means and not beyond your means by using credit.