A woman’s money should reflect her life, not a random milestone. Learn why the traditional definition of emergency fund is outdated and how to build real wealth. 

The Traditional Definition of Emergency Fund

An emergency fund is essentially money set aside to meet financial emergencies. In the traditional definition (aka the one touted by Boomer financial experts and the planning industry), it is a savings of 3-6 months of necessary expenses, to protect you against unforeseen circumstances, most commonly the loss of a job, which would reappear in six months.

Here’s an example definition from a very popular older, white, male Expert:

An emergency fund is simply money you’ve set aside for life’s unexpected events—sometimes people call it a rainy-day fund. But whatever you want to call it, this emergency savings can take care of whatever life tosses your way.

“Whatever life tosses your way…” That whole vibe makes it sound like the unexpected event could be a friend inviting you to the beach in Mexico for a week. “Let me throw this idea out there: it’s cold. Let’s go to the beach for a week and work from the deck of our AirBnB because self care.”

A lot of expert posts are like this – they reek of financial privilege most people don’t have, much less women. We have higher dependent and medical costs, and lower incomes on average. The idea that jobs are likely to reappear in 3-6 months is laughable if the first thing you have to cut back on is childcare you can no longer afford.

My Definition of Emergency Fund For Women

Here’s my definition of “Emergency Fund”:

An Emergency Fund is a buffer between you and financial disaster when the shit hits the fan. It helps protect your housing, kids, credit score, health, safety and future, when you get a nasty money surprise. 

Financial Emergencies (experienced by women I know):

  • You lose your job to COVID shutdown or patriarchy
  • Your partner becomes unstable and you need to grab the kids and go
  • One of your kids gets cancer and you need to take unpaid family leave
  • Your dog gets hit by a car and needs life saving surgery
  • Your roommate decides you’re “not a fit” and kicks you out 
  • Your twins arrive a month earlier and spend some time in the NICU two towns away
  • You experience a traumatic event and need therapy and medication to manage the PTSD (This was me – your mental health can absolutely be an emergency.)
  • Your father dies unexpectedly and your mom needs a hand paying bills 
  • Your husband has a major bike accident and gets airlifted (not covered) to the regional  hospital with an ICU
  • You need to take financial responsibility for your sister’s family because of her substance abuse and mental illness

Not Financial Emergencies (also from women I know):

  • You want to take some time off to see if you want to be a SAHM
  • Your partner wants to switch careers and take a lower paying job
  • You decide to divorce
  • Your cat needs teeth removed (actually my cat)
  • You have a baby and that shit is expensive
  • You want to work through your childhood trauma in therapy
  • Your mother passes away and you pay funeral expenses and travel to mourn her
  • Your father has not saved for retirement and needs assistance

While the second list are all important, urgent and worthy things to spend money on, you would NEVER confuse the first list with anything other than a crisis. 

Emergency = Emergency

So, What Is An Emergency Fund?

Emergency funds act as buffers that keep you on course in tough financial situations. It allows you to pay necessary bills when you lose income unexpectedly, or pay surprise bills that no one could have seen coming. 

Moreover, it is a fund that protects your other finances and assets during a crisis. For instance, a good emergency fund means:

  • You don’t have to take a loan from your 401k to pay a maxed-out deductible for a medical emergency
  • You don’t have to cash out retirement savings and pay a tax penalty, when you take FMLA
  • You don’t have to raid your regular childcare budget to pay bills when you get laid off and need to job search

Ideally, an emergency fund should meet certain requirements:

Emergency Funds Are Liquid 

Emergencies cannot wait. Consequently, an emergency fund should contain cash or high-liquidity assets you could sell immediately with little downside. For this reason, some people consider the contributions to their Roth accounts as part of their emergency fund after five years – you can pull them out without tax or penalty, since you already paid tax on it.

Emergency Funds Are Fast 

The emergency fund should be held in an account you can get money out of within a day or two. I believe that women should always have a secret cash stash, even if happily married, in addition to an emergency fund in their own name. Even if happily married. When you need to go, you better be able to go. 

Emergency Funds Start Small

My biggest issue with the traditional definition of emergency fund is that it targets 3-6 months. Most Americans can’t meet a $400 surprise bill without going into debt – so start there. $400 is how much a friend of mine had to flee a marriage. Years later, as a single mom, she has 6 months of expenses saved, which is a great goal, but she focused first on covering her buns. 

Types of Emergency Funds

As I mentioned before – I think women need at least two emergency funds, possibly three. They serve different purposes and different levels of urgency. 

The Go Bag

If you live in California, you have a “Go Bag” – the bag you grab when there is a major earthquake or fire and you have minutes to get out of the house. 

The “Go Bag” Emergency Fund is the financial equivalent.  I know several women who have had to flee a dangerous situation at home with their kids and whatever cash they have on hand. That cash on hand is your Go Bag. 

Any amount you can hide in cash is good, even if it’s a small buffer. $100 or $200 will do a lot in a crisis. My Go Bag is $1000 because I could hide my family for at least a month with that amount of money. This may sound crazy, but everyone has a different number that will make them feel safe. Figure out what that number is for you and shoot for it.

My favorite example of The Go Bag is from Moira in Schitt’s Creek, whose Go Bag is an actual bag she would pawn to fund her escape. And notably, she never pawns it despite all they go through.

Moira Schitts Creek Crocodile Bag Emergency Fund Money
(Meme Credit: Buzzfeed)

The Core Emergency Fund

The Core Emergency Fund sits in a savings account and is some amount that makes you feel safe. If you look at my list of emergencies above, most of them don’t require having cash on hand. Getting access in a week is totally okay, so an online savings account with a higher interest rate is a great option for this. More on where to park this and how much to save below.

The Loved One Fund

The Loved One Emergency Fund a fantastic idea I learned from Rita-Soledad Fernández Paulino, a Financial Educator at WEALTH PARA TODOS. Soledad notes that people from collectivist societies can be impacted by other people’s financial crises. She suggests that you may want to build an emergency fund to step up for a loved one if you are a first gen wealth builder who wants to help, but also want to set some boundaries on how much you can and can’t help financially. Check out her post on it (below) and fun reel on l!

Credit & Thanks: Soledad @wealthparatodos

How Big Should Your Emergency Fund Be?

The traditional recommendation is 3-6 months of “Necessity” expenses is kind of a made up number. Here are some actual guidelines:

Plan To Be Unemployed At Least Four Months

In November 2021, It took 45% of unemployed people more than 15 weeks  to find a new job. That’s about four months. But 32% took more than six months. The average was about three months, according to the Bureau of Labor Statistics. Three-six months is the majority, but also optimistic. 

Modify That Number Based On Your Age, Industry, Role, And Location

A 60-year old pharmacist assistant at the only pharmacy within an hour of her house is going to have a harder time replacing her income, than a mid-level programmer who lives in Silicon Valley. 

Consider Family Factors

If you are planning on starting a family, a bigger emergency fund is a good idea. I know a lot of people who had surprises with kids under five (Medical, Covid, Special Needs, etc.). Similarly, if your extended family is not financially secure, you may want to build A Loved One fund. 

Save Twice Your Out of Pocket Max for Health Insurance

Figuring out the true cost of health insurance is incredibly complicated – I was well into my 40s before I really understood it. The most important number is your “out-of-pocket maximum” from your health insurance. This is the amount of money that you could pay per year including your deductible. It matters for an emergency fund because although it’s very unlikely you would hit this number, a medical emergency could max it out almost instantly. More than 67% of all bankruptcies were medically-related, so being able to pay max medical bills for 2 years offers major financial security.

Consider Chronic Illness, Mental Health and Disability

Women are far more likely than men to become disabled, have a chronic illness or seek treatment for mental health disorders. It’s really easy to blow these off, so let me illustrate with some personal stories.

Therapy is a huge privilege – it’s rarely covered by health insurance and it’s not cheap.After a three year battle with stillbirth, miscarriage and several medical emergencies of my own, not only had I maxed out my deductible, I developed terrifying PTSD. Combat nightmares, blackouts, and huge difficulty managing my mood enough to function. But being able to pay for therapy so I could keep it together enough to keep my job was CRITICAL to our financial security as a family. 

I also have two chronic autoimmune diseases. They are inherited and permanent. I have to manage them actively for the rest of my life. I would die without medical intervention and would certainly not be able to work. And they could go – and have gone – bonkers at any moment – in her sixties, my mom had five major surgeries that took her out of action for months. 

Disability insurance would cover some of these issues – but it’s generally limited in terms of the benefit it provides and also has long elimination periods. Your emergency fund should cover what disability insurance won’t. 

Account For Your Likely Risks

Different women have different risks. A woman renting in a tight housing market, would have a big expense if her roommate had the lease and got picky. A woman like my mom, who was a sales contractor for most of her career, had a lumpy income and company/product uncertainty, but could also get a job in a heartbeat because she could sell anything. 

You know you best. If you are a few decades into your financial journey, a good way to figure out how much emergency fund you need is to look at the kind of money emergencies you had in the past, and figure out how much it would cost to navigate them well now. It’s also a good idea to look around. I bet you could make your own list of emergencies among your girlfriends, like the one above. 

How To Build An Emergency Fund 

Saving for emergencies can be a challenge, especially if you have a low or unreliable income. But even a little buffer will keep your boat upright in a storm. Here are tips to help you establish a reliable emergency fund: 

  • Start small and set your monthly savings target 
  • Choose an accessible savings account with a high interest rate
  • Have an automatic deduction plan with your employer
  • Save your tax refund and any unexpected windfalls

There are a million ways to save an emergency fund – it doesn’t have to be regular. One of my favorite posts by Dasha Kennedy of @thebrokeblackgirl shows how to build a $1000 emergency fund in a year, with monthly amounts of $30-130. She also does a 16-week challenge to get to $500. Making it more of a game for yourself, and setting achievable goals, can keep you focused. (Dasha is a great follow if you’re trying to save your first milestone – she makes it fun). 

Credit & Thanks: Dasha @thebrokeblackgirl

Emergency Fund Hacks

There are some ways to make the first $1000 a lot less painful. Here are just a few:

Bring A Friend

This will sound weird coming from someone who has a Go Bag of cash her husband doesn’t know about, but make saving a team sport. The more you discuss money, plan and save with your partner, even if it is rocky at first, it is like cement on the foundation of your relationship. And a lot more fun. As rocky as our first money conversations were, I love planning with my husband. And he tolerates me. 

Join A Savings Challenge On Instagram Or Reddit

You are not the only one trying to slay this dragon. Use social media to be social and join a savings challenge. It can REALLY help you meet your goals. 

On Insta, search the #savingschallenge hashtag for “Recent” and find a vibe you like. 

On Reddit, /r/frugal and /r/personalfinance have savings challenges, plus commentary of course. And apparently a Discord server?

Buzzfeed also has a list of different types of savings challenges, so you could find one that appeals to you and search your favorite social platform for that type. 

Savings Apps

This is a placeholder to remind me to check out Cleo and Chime. I find their products intriguing but haven’t tried them out. Email me if you have any insight or other ideas. 

Save Your Tax Refund

This was my jam when I was single and trying to save money. I was conservative with my withholding on my paycheck, letting the IRS take a little more than I thought I needed to. This  had two benefits: I didn’t have to write a big check in April, and I could always sock away my refund. 

This move is particularly powerful for low income savers, who also benefit from refundable credits. If you know the IRS is going to pay you the Earned Income Credit, Child Tax Credit, or Dependent Care Credit, save part of it every year. 

Get Insurance

I love insurance. Especially for women. Health insurance, Disability Insurance, Car Insurance, Life Insurance. So many of the financial crises that cause bankruptcy could be avoided by prioritizing insurance. Insurance is one of (if not THE) safest part of a financial plan. 

When Should I Use My Emergency Fund?

Not all financial lows are emergencies – some are just cash crunch issues. A good example would be an annual insurance premium you forgot about. Though it may catch you off-guard, some expenses are predictable and some are real emergencies.  

A lot like medical crises, there are different levels of emergency: call a nurse friend, go to urgent care, or call 911. The emergency fund is for the 911-level emergencies. The rest should be covered by a sinking fund. 

Where Should You Keep Your Emergency Savings?

Where you put your emergency fund depends on your situation. You want to make sure this fund is safe, accessible, and in a place where you’re not tempted to spend it. Here are a few options:

Any Savings Or Money Market Account 

It’s hard to find ANY savings account that will pay meaningful interest, so don’t sweat the interest rate. The difference between awesome (0.5%) and average (0.06%) is not big enough to be an important factor, if it’s going to cause you to delay, or prevent you from opening a dedicated account. Whatever your bank or credit union offers is fine. 

Furthermore, this isn’t an investment account, it’s a safety net. It does its best work by just sitting there everyday, ready when you need it. It’s job is to sit there. 

Online bank for Savings

Online banks offer two benefits, if you want a little boost: first, they have higher interest rates, and second, it’s harder to get at your money. I used Barclay’s for a while, but don’t recommend them because their website was dated and clunky. Ally Bank gets great reviews for customer service and has the highest rates I saw when writing in December 2021. I am also a passionate fan and long-time customer of American Express. Their online savings has great (if not top) rates, but Amex wins on customer service. (Neither of these is a paid link – just my take)

Prepaid card Emergency Fund

A prepaid card is a card that you can load money onto. It’s not connected with a bank or credit union, and you can only spend the amount on your card. The upside is it’s really convenient and easy to hide. The downside: high fees and if you lose it, it’s really gone. I would personally be more likely to lose a card than an envelope of cash.

Cash Emergency Fund

Another option is keeping cash on hand for emergencies, either in your home or with a trusted family member or friend, like the Go Bag. Keep in mind that cash can be stolen, lost, or destroyed, and you need to hide it well. 

While you can’t predict unexpected expenses, you can prepare for them. As a single woman, having a financial buffer can help you sail through tough economic situations courageously. 

Whew! That was a post. If you got this far I commend you! The takeaway: Get Your go Bag Ready.