Increasing your Emergency Fund over the long term

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by sesen0


I wanted to share my recent experience with an inadequate emergency fund. When I started getting into personal finance, my husband and I were in our early 20s, the recession was in full force, and we made about $75k joint income. We were lucky in that we never lost our jobs, we were never unable to afford our house payment, and we were saving 15% of our income for retirement by the time were about 27, plus another 17% of our income going to savings for other short- and medium-term goals.

We had saved up $10k for an emergency fund during that time, 2007-2010, which was more than 4 months’ expenses for us back then, even with some small student loan debt.

We never increased that emergency fund as our income and expenses have grown in the last 10 years, and now we’re regretting it: my husband was laid off a few weeks ago, and then our hot water heater died a couple of days later. Our budget was already precarious because of very expensive childcare for the past 8 months, unpaid maternity leave of 12 weeks last year, medical bills, a recent bathroom renovation at the beginning of 2018 which depleted other savings, and the water heater has ended up costing us almost $6000 because of building code/plumbing inadequacy issues, it being in the crawl space, and choosing to switch to a different type of water heater in the process…

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The good news is, my husband already had a new job lined up before he was laid off, and my MIL was generous enough to gift us more money to fill the gap for this 6 weeks or so. But that initial $10k emergency fund was essentially gone within a week after he was laid off, spoken for by the water heater and the month of lost income. We chose not to pull our kids from childcare since we knew he’d be starting his new job soon, and it’s too hard to find a new spot, plus being very stressful for the kids.

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It’s very difficult to balance all of the expenses that come with adulthood – paying off debt, saving for retirement, having kids, buying a house, health insurance premiums going up every year, and trying to save for your kids’ college also. Increasing our emergency fund wasn’t as high a priority among all those other increases, but it should have been at least somewhat increased.

I just wanted everyone to hopefully learn from our mistake.



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