Welcome to Taking Stock, a space where we can take a deep breath and try to figure out what the COVID-19 economy really means for our finances. Every month, personal finance expert Paco de Leon will answer your most difficult, emotionally charged questions about money. This last two years have forced many of us to reprioritize our finances, and there’s no clear road map for getting through the pandemic yet — but Taking Stock is here to help us figure it out together.
Last time, we spoke with a reader who was unsure about how much money to save up in case of an emergency. This week, we heard from Refinery29 readers about their own personal emergency funds and how they learned how much they should have tucked away in case of a life-altering situation.
Emel, 26 — Texas
Emel tells Refinery29 that she currently has $12,000 in her emergency fund, although initially, her goal was $5,000. "The idea was that I could have an extra $1,000 a month for an entire year," she says. "Ideally though, I'd like to have enough money to cover my entire expenses for a year, and $12,000 just wouldn't cut it."
Emel first heard about emergency funds when she was 17. "I was graduating high school and Googling how to be prepared for the real world," she says. "Thankfully, I came across I Will Teach You To Be Rich by Ramit Sethi, which talks about personal finance and having an emergency savings account. I'd recommend that book to everyone getting started in their personal finance journey."
Since reaching $12,000, Emel hasn't put any more money into her emergency fund due to inflation and the looming recession. Instead, she's focusing more on investing. "Ideally, I'd have enough money set aside for an entire year. However, out of my $3,500 that I save every month, a good chunk of it goes to my long-term investments and crypto," she says. "I'm putting more into investments these days rather than a savings account for my emergency funds."
Eva, 27 — California
Pre-pandemic, Eva had $10,000 saved in her emergency fund — now, that number is $5. "I started [saving] with my first full-time job in the beginning of 2017, and somewhere around 2019 I had the $10,000 saved and kept it in there until the end of 2021," she says. "$10,000 just sounded like a good amount, but also covered more than a few months of worth of bills."
A month before the pandemic began, Eva quit her job due to burnout and stress and felt comfortable using her emergency fund to fall back on. "I had just started a food and travel blog, so I was making less than $500 a month off of that and used my savings to supplement my income until I could build my business," she says. "I also received those stimulus checks that went out to pretty much everyone, which also helped supplement my income along the way." In the winter, she also picked up a position with Burlington Coat Factory to make some extra cash.
Before Eva quit her job, around 10% of each paycheck would go into her emergency fund. But now she says she doesn't make enough to save right now — instead, she's working on paying off her credit card bills.
Julia, 26 — Pennsylvania
Julia is a teacher and was planning on teaching summer school, but had to miss out on the extra cash when she came down with COVID-19. "Despite being fully vaccinated, my immune system has always been weak and my symptoms lingered for two weeks after my quarantine period and my vertigo was taking over my ability to fully recover," she tells Refinery29. "I had to take days off and miss out on money."
So, she turned to her emergency fund. "I had to dip into $4,300 of my emergency fund last summer after missing out on three full paychecks in order to pay student loans, rent, phone bills, car insurance, and payments, and water and electricity for the months of July and August." She had started with $7,500 in her emergency fund and was left with around half.
Thanks to advice from her dad, Julia has been working on saving $50 to $100 from each of her paychecks to replenish her fund. Now, she currently has around $5,500 saved. "I just figured if I put some money away little by little and something happens to my job at least I have something to hold me over to pay my student loans and bills for a little," she says.
"My father always told me to invest in myself and an emergency fund," she says. "I was lucky that I listened when I did and used it last summer when I did not have an income and have been replenishing it little by little ever since. I think they’re extremely important to have especially because you never know what life may throw at you these days with COVID and inflation and empty promises about student loan forgiveness."
Tara, 37 — U.K.
Tara currently has £3,900 (about $4,788) saved in her emergency fund. Prior to the pandemic, she didn't have one, but the pandemic opened her eyes, and she tells Refinery29, "I needed to build an emergency fund that I could live from for at least a year and a half. To calculate the amount, I added my monthly living expenses for 18 months." Right now, she's about a quarter of the way there.
"The necessity of an emergency fund really came to light during the pandemic when myself and friends faced significant financial challenges," she says. "In my opinion, emergency funds are essential and without one you are vulnerable to unforeseen events. Certainly, for me, building my emergency fund is a high priority."
How has she done it? "I save a small amount from my earnings each month and add any extra money I have from birthdays and Christmas. My aim is to have enough money in my fund to cover basic living expenses for a year and a half. This is my safety net, that I can rely on should I face challenging times."
Although she adds money monthly, Tara's fund isn't necessarily where she wants it to be. "In some respects my fund, as it stands, makes me feel more secure, but I am anxious about how slowly it grows and worry about how long it will last if I do need to use it," she says.
Erin, 25 — New York
Erin doesn't have an emergency fund. It's not because she doesn't want one, it's because she is currently living paycheck to paycheck. "If I had any extra funds, I would probably pay more towards my student debt," she tells Refinery29.
Not having an emergency fund makes her anxious, and she also says that she didn't have an opportunity to learn about finances, budgeting, and saving while she was growing up. "I’ve never really heard much about [emergency funds]," she says. "My parents are not good at saving or teaching me about money."
"I'd love to have a savings, which I guess would be an emergency fund," she adds. In a couple of months, Erin is moving out of an expensive city and to a cheaper place to live, so she's hoping to start padding out her savings then.