The Emergency Fund!

It was late at night. At the last minute I decided to go home instead of going out dancing with my friends. I hightailed it to a bus stop, but no bus arrived for quite a long time, long after the next three scheduled times. I gritted my teeth and hailed a taxi.

On getting out of the taxi, my handbag exploded all over the ground. I picked everything up and made my way with as much dignity as I could muster home.

Or at least that’s what I thought happened. In reality, I must have overlooked my credit card on the ground, because when I woke up the next morning I couldn’t find it.

But instead of panicking, or getting angry, or feeling guilty, I felt a sense of calm and collection. I felt that way because of the emergency fund.

The emergency fund is exactly what it sounds like: a pot of money I keep aside in case bad things happen. In this case, I didn’t technically need to use the emergency fund at all–it’s more for things like unexpected medical expenses, or if your house gets robbed and your insurance hasn’t come through yet, or if you suddenly lose your job. (I could take the taxi money out of it, technically–though better planning on my part could have avoided the need for that.)

Even though there wasn’t really a fiscal need for the emergency fund this time, just knowing that it was there, just knowing that if I were really in dire straits I wouldn’t be without a recourse, made it so much easier for me to roll with the situation and sort it out with a minimum of fuss instead of approaching it like a passenger on a cruise ship that’s just hit a rock.

It didn’t hurt either that my current bank made it so easy to get what I needed: I called them right away, they stopped the card, told me how to fill out a fraud declaration form for the one tiny expense that was charged after the card was lost (thank goodness it was only very small), and arranged for me pick up a new one right in the branch on the same day. (Hooray for banks that are open on Sundays–and where you’re not caught out by waiting several days for a new card to arrive by post!) Within an hour of realizing what happened, I had a new card in hand and all the paperwork was filled in.

I think it wasn’t just having the funds available, but also the knowledge that I had anticipated that things like this happen and put in place the mechanisms to deal with it that also gave me the confidence to approach things calmly. We all sort of know that something like this will probably happen at one point or antoher, but I think fewer of us have thought in practical terms about what we’d do when it does.

I’d always had a small bit of emergency cash available, but before about a year ago I hadn’t set it aside in a separate fund, nor thought about how much I should have in it. My favorite financial advice site helped me get a clearer picture of how much the emergency fund should contain (at least six months worth of expenses), how important the emergency fund is relative to other financial needs like paying back debt (way more), and why it’s important to keep it seperate from your regular savings (so you don’t start eating away at it to pay for other stuff, like a canal boat or a pony or something.)

Within a year I’d successfully topped up my emergency fund and stashed it all away where I can’t easily get my grubby little hands on it when I want some theatre tickets or a new pair of shoes. Even though, as I said, I was only put out in a very small way by the taxi and losing my credit card, just knowing that I could set financial goals and stick to them helped me feel a lot better about managing the unexpected. Money matters have always made me feel a little intimidated, like I’m swimming in a strong current and have to keep my wits about me. This time (even though it would have been better not to lose the card at all, or have to take a taxi home), I felt like I had.