How Long Should It Take You To Build Your Emergency Fund?

Build Your Emergency Fund

Do you know how long it should take you to build your emergency fund?

Will it take years or months?

I have a secret.

It depends.

Your emergency fund should be funded based upon three to six months of your living expenses.

The length of funding (how long it takes) it depends on you.

There is no specific time frame for how long it should take to build your emergency fund.

What Is An Emergency Fund?

An emergency fund is money set aside in an account separate from your main one which you use for emergencies.  Your emergency fund should be in a liquid asset. This means you should be able to easily get to it. Do not place your money in an account where it may take several days to obtain the funds.

Why Do You Need an Emergency Fund?

I built my emergency fund because I wanted to make sure I had enough money to cover me in the event of a job loss. My emergency fund covers my mortgage, my car note and car insurance, my utilities including my cell phone, internet and groceries.

Everything else is negotiable as far as I am concerned and I would figure out if those other “luxuries” would be worth my money. My emergency fund is to cover me in the real event of an emergency.

Build the Cost of COBRA Coverage or The Affordable Care Act Premiums Into Your Emergency Fund

There is nothing like being unemployed and having no health insurance. For this reason, I would strongly encourage you to build in the cost of COBRA coverage or the Affordable Care Act (ACA) into your emergency fund. COBRA is extremely expensive so adding this into your emergency fund may not be doable. While the ACA is expensive it is less than COBRA coverage.

What Not to Build Into Your Emergency Fund

You do not need to build  into your emergency fund getting your hair and nails done or clothes shopping. The emergency fund is like a survival kit. It is strictly to be funded and used to keep a roof over your head, basic clothes on your back, and food on your table.

How I Built My Emergency Fund

I would love to tell you it was an easy breezy process for funding my emergency fund but it wasn’t. Read my story here.

My financial advisor told me in 2011 to fund mine for $15,000. She also told me it shouldn’t take ME more than a year. Based upon my financial picture it shouldn’t but hey, things happen. I didn’t completely fund mine until  about 2016. I did the best I could with all I had to save for: retirement, college, and just living.

During those years, there were times when I couldn’t contribute anything because of personal circumstances: kid going to college, my car broke down on I-75 (a highway in Georgia) and I had to buy a new car.  Factoring a car note into my emergency savings put a major damper on my progress. But I funded what I could and eventually I was able to fund it.

No matter how long it may take, be consistent and you will see results.

See this emergency fund calculator.

Don’t Take Money from Your Emergency Fund for Non Emergencies Once You Build It

Do not borrow from your emergency fund because you want to go on vacation, buy a new car, or want the latest t.v. or Iphone. You should create a separate “fun account” for such expenses. If you want to take a vacation, then start a vacation fund. If your goal is to buy a brand new car or even a t.v., save for it and better yet, buy it when there are some great sales and deals. But do not ever use the emergency fund for non-emergencies.

Don’t be like 39% of people who only have $1,000 in an emergency fund.

A Credit Card is Not An Emergency Fund

Please do not consider your credit card as your emergency fund because it isn’t. Not only are you going to owe more money to cover the expense but you will pay interest on it which is not a good way to spend your money.

Everyone can build an effective emergency fund. Determine what your expenses are during a three to six month time period and do your best to make regular contributions to your designated account.