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Emergency Savings

Having an emergency savings fund not only helps effectively cover unforeseen expenses, prevent messing up your existing financial plans, but most importantly, it assures you the peace of mind that is important to be comfortable with your personal financial situation. It is easy to forfeit putting away small amounts of money into an emergency savings fund, but the stresses of having to alter you entire existing financial plan to cover an expense often outweighs the conveniences. Today we’ll talk about how to start an emergency savings fund and why you should do it if you have not already done so.

An emergency expense is quite self-explanatory: an expense that can range from an insignificant cost to a severe financial burden, but most importantly one that cannot be predicted. For that reason, it is important to create a pool of money that can be tapped into whenever any unplanned expense arises, as opposed to planning for specific expenses. It is far easier and more effective to hold onto a general emergency fund instead of pre-allocating money to expenses that you think will happen. For example, if you put away $300 for a potential phone repair and stop saving, but your car breaks down costing you $600, you will be able to afford neither expense.

To make sure your phone is working and distracting you in lectures, and your car being able to drive you to them, the Personal Money Management Center recommends that you begin saving up an emergency fund that fits your needs. To begin outlining a basic emergency savings fund, consider where your money comes from. If you are on scholarships or receiving help from parents, you may be less concerned about having to fund larger expenses such as rent, utilities, or other recurring items. However, if you are in this situation you should still create some sort of emergency plan that will cover expenses that neither you or your financial supporter anticipates. Punched a hole in your dorm wall that you wouldn’t like to explain to your parents? Emergency fund. You inevitably received a ticket by parking illegally to make it to your midterm? Emergency Fund.

If you generate your own income and pay your own expenses you may want to pay more attention. In addition to the PMMC, many banks and financial experts suggest that you should save at least three months’ worth of salary in your emergency fund. That way if you do lose a job, you'll have enough money to get by for a few months until you can find replacement work. However, depending upon your preferences and income level, the amount will vary. You should first calculate what your living expenses are. Tally up how much you spend each month on all your expenses. You should have at least enough to cover your living expenses for three months, and probably even more.

Lastly, consider what you own. If you own a car for instance, especially one that is aging, you should have a larger fund that can support a repair. Those squeaky brakes on your car you’ve been ignoring in the same way a dog refuses to acknowledge the existence of that couch he chewed through while you were out, can cost you if you aren’t prepared. Don’t ignore your brakes and plan conservatively. In the scenario that you amass a larger savings account than you may need, that money is still earning interest and working for you even though you’re not spending it on a day to day basis.

 There is no harm in having a sizeable savings fund because the amount you will need in that savings fund will increase as you age and (hopefully) make more money. Furthermore, if you plan to, or already have a family, experts suggest you hold 6 months’ worth of expenses in your fund. The time period increases because you are now not only supporting more people, but the probability that someone in the family gets hurt or sick also increases. Factor in the worst-case scenario and what your insurance or other sources will cover if you have them, and save away what you can reasonably afford.

 Typically, it is easy to start saving money into an emergency fund and shouldn’t require any inconvenient alterations to your lifestyle. By simply saving $2 a day for a year by driving a few minutes less, opting for water instead of that soda, or parking legally and preventing tickets, you will already have $730 to cover an emergency and start kicking some bad habits just in time for your new year’s resolutions. $2 a day is a good starting point if you can afford it. If you don’t already have one, your emergency fund doesn’t need to be ready today or this week. By saving within your means, by the time an emergency comes you will be more prepared than you were the day before or if you had never started in the first place. 

But how do you actually put these savings into practical use? If you have a bank account, open a new account explicitly and solely for your emergency fund. Banks and credit unions often let you open many accounts and you can control what goes into each one. By designating one for emergency uses only, it prevents you from accessing it when you should be doing so. For instance, if you have $1000 in your fund but hold it in your general savings or checking account, it is extremely easy to burn through it by paying for non-emergency items. For this reason, we recommend a separate fund that requires a conscious effort to access and withdraw funds from.  

Of course, it’s much easier said than done to actually consistently save money away towards a fund after reading an article on how to do so. The Personal Money Management Center specializes in helping students accomplish their financial goals whatever they may be. If you would like more information about emergency savings, schedule a free appointment with the PMMC where one of three highly qualified counselors will help you build your own savings plan and reduce any unnecessary stresses.


Have other financial questions or concerns? Reach the Personal Money Management Center at 801-585-7379, visit our website for easy scheduling at, or come to our office for a walk-in appointment in the Student Union Room 317.

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Last Updated: 12/12/23