One of the keys to long-term financial security is building an emergency fund. Even if you’re a very prepared person, things happen. My husband and I were extremely financially organized before we added a child and a much larger mortgage to our family. We had a good emergency fund of several thousand dollars, less than the six months of income that some recommend but more than the thousand dollars recommended by others. We felt confident.
Then I went on maternity leave, which is a year long here in Canada. That was wonderful, but it did cut my income quite substantially. Three months after my daughter was born, my husband’s workplace went on an extended strike. Four months after my daughter was born, our barely-working furnace blew on a cold night in November. Both furnaces and strikes tend to be expensive, and we found ourselves in a tentative financial position. We dug out of it.
The next year I returned to work, only to go on strike for several weeks myself. This was unexpected and wasn’t as much of a financial hit, since I work part time and did some extra landscaping work during the strike. However, our tiny and growing emergency fund was once again at zero. Did I mention that during the last 20 years, these are the only two times our workplaces have gone on strike? We’re just lucky, I guess.
We got back up again. Last year, after two years of working at it, we finally had another emergency fund. Celebration! Then our beloved cat got extremely sick. As I sat there crying and petting him, I realized that saving him was going to cost us a lot. We chose to save him, and yes…the emergency fund once again was at zero.
Today we’re working to rebuild our funds once again. We are also trying to create long-term savings plans for items like renovation and repairs and pets. These long-term savings will act as a small cushion before we need to dip into the larger emergency fund. The reason for creating these savings is a realization that emergencies happen. In fact, financial emergencies tend to be a regular part of life. While you can’t anticipate what the emergency will be, saving for pet care and home repairs is logical and provides a reassuring backup so that you can sleep well at night. Unless your furnace goes out, of course.
Image courtesy of rawku5 at stock exchange.