Stop! Don’t touch that emergency fund

I must have this conversation with my peers at least 3 times a month and it always goes something like this…

Peer: Wait, you mean to tell me that I need to have a savings account I never touch unless it’s an emergency?
Me: Yes, your emergency fund is never touched unless you really need to.
Peer: But growing up I was always taught you put money into a savings account for big purchases.
Me: Yep, but that’s separate. Those types of savings are considered short/long term goal savings account where you save for something specific.
Peer: So you mean to tell me I have to save twice!!

Truth be told, I use to think like this too. I used to put money into a savings account to “save” for a big purchase like my car, a new purse, a shopping spree. Then, after all that saving I would spend it, and start back at zero. Not the smartest thing to do because at the end of the day if I had to go to urgent care after driving off the lot with my brand new car, I would have no way to pay for that deductible.

Have you ever watched those shows on TLC like the Haunting, where a family moves into a haunted house and then the narrator says something like “and they couldn’t leave because all their money was tied up in the house.”  Yeah, well that’s because they used all their savings to purchase a haunted house and now the family has no emergency fund to GTFO. You don’t want to be that family that’s living with ghosts. Don’t be that family on TLC’s the Haunting.

Thinking about savings on multiple fronts can be difficult, and to be frank, when you realize how much you actually need to put away, the task can seem daunting. A little here for the emergency fund, a little here for a down payment, a little here for a new car, it seems like you will never get there! But just like Rome, a robust savings account will not be built in a day.

It takes a lot of discipline and a eye on the prize. Break down your goals into bite-sized pieces and set realistic timelines. For example, lets say you want to save $6,000 in an emergency fund and $10,000 for a down payment on a house (thank you FHA loans!), your timeline is in 1 year I want to have 6k in my emergency fund and in 2 years you want to purchase your first home. To save $6,000 in 1 year, you need to save $500 a month, that’s $125 a week, $17 a day! Think of all the stupid crap you can buy in 1 day for $17. Heck that can be 3 trips to Starbucks. Now, how about the big one, $10,000 in 2 years for a home. Well, that’s $416 a month, $104 a week, $14 a day. If you try to save $31 a day for two years, not only would you hit your emergency fund goal, but also have enough saved to purchase your first home! If you find that your timelines and monthly savings goals are too aggressive, extend the time frame to reduce the monthly savings rate.

I know, I know, easier said than done, but like I said earlier, you gotta keep your eyes on the prize and set realistic goals based on your monthly earnings and expenses. If it’s important to you to reach financial freedom and do these “adulting” things, then you’re going to have to sacrifice here and there. Maybe it’s skipping the weekly happy hour and going every other week, or brewing your own coffee at home. Maybe its cutting your cable and sticking to streaming services, or downsizing your car payment by getting a less expensive one. Little things that in the grand scheme of things can make a huge difference.

I know it’s hard thinking you have to save twice as much, but I can’t stress to you how important it is to keep that emergency fund and those short term/long term savings goals separate. You need to have a safety net, and you also need to make sure you’re saving for large financial milestones. Remember, don’t be that family that gets stuck in the haunted house!


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