The Painful Truth About Your Emergency Fund

Let me make this clear: I am a frugal person. I save vegetable scraps to make broth, and soap scraps to turn into lumpy new Frankencleanser bars. Of 1,095 annual meals, probably 1,085 are made at home, from scratch. I can (and do!) go several years without purchasing any clothing except an annual new-to-me pair of jeans from the thrift store.

Why, then, did I drop $40 on Powerade and overpriced over-the-counter medications at a hotel gift shop? Because sometimes it’s worth it to pay more—but that doesn’t mean it was easy.

Backstory: I was speaking at a conference in San Diego, having driven in from Phoenix with my daughter, fellow personal finance writer Abigail Perry. She started feeling sick almost as soon as we arrived. That first day I drove to a drugstore for juice and OTC meds, getting lost (and ragey) in San Diego rush-hour traffic.

But as Abby grew sicker, I couldn’t leave her for long. So down to the hotel gift shop I ran—and ran, and ran—hoping to find the One True Med that might help. My frugal alarm blared each time I shopped: Seriously? Three bucks for a Tums roll shorter than a preschooler’s fingers?

To stay calm, I would chant this mantra: You have an emergency fund. This is an emergency. QED.

I would have done anything to make my daughter feel better. Yet I have to say that paying inflated prices rankled.

That’s the painful truth about your emergency fund: While you should be glad you have the money, you’re not.

That’s because the need to tap your EF means something bad (or really upsetting) just happened: Maybe you’re in shock due to job loss, or infuriated that some nimrod sideswiped your parked car and kept going. Watching your cash cushion deflate just adds insult to injury.

Saving that fund took time, patience, and, yeah, sacrifice. Now it was all leaking away, one $7.39 box (a really small box) of Gas-X at a time.

Emergencies: We’re not ready

Maybe that’s why some people avoid saving for emergencies in the first place. Nixing a couple of lattes or a movie ticket each week means they might have to consider the unpleasant stuff that could happen to them. Much more fun to think “YOLO” instead of “uh-oh.”

Who wants to consider that some day—maybe as soon as tomorrow—you could find yourself in deep financial poop? Especially since those painstakingly saved dollars could vanish faster than you can say “deductible.”

Emergencies happen, and as a nation we’re not saving for them—which I consider an emergency, too. According to the Federal Reserve, 47% of U.S. residents would be unable to cover an unexpected $400 expense without borrowing money or selling something.

It took me quite a while to set aside my rainy day fund. Now here I was, paying for Powerade that cost 10 times more than gasoline ($23.92 per gallon—I did the math in the elevator) and having to anticipate an indefinite stay in a strange city.

Did any of that really matter? Not once my daughter was hospitalized with a terrifying diagnosis: Sepsis, which can be fatal. All I wanted was for her to get well—and having that financial cushion meant I could be by her bedside with (relative) peace of mind, instead of saying, “Gotta go. Hope you feel better!”

That’s what it’s there for

Those pricier-than-petrol Powerades looked pretty cheap compared to what I shelled out for four extra days in San Diego, costs including but not limited to lodging, rental car, hospital parking, and my rebooked flight. All told, I spent about $1,000 more than I’d planned on the trip even though I did what I could to minimize costs. (Did I mention shopping for sandwich makings at a nearby supermarket? Or finding and booking a 67%-cheaper hotel room through the Mr. Rebates cash-back shopping site and earning a $6.57 refund in the process?)

Sometimes you just have to suck it up and pay it out. I’m a freelance writer, so that extra grand did hurt. But it would have hurt a lot more had Abby’s illness popped up when I was cash-cushionless.

An emergency fund isn’t meant to be adored like a golden calf. It exists to take care of things when your normal income can’t.

Had unexpected expenses of your own? Sorry for your troubles. Now: Start stuffing whatever money you have into that cushion. Even if your budget is tight, a little creativity could help you shave off a few dollars here and there to be banked against future areyoukiddingme? moments.

Even a small emergency fund will make a difference. While it may not cover every unexpected expense, even a modest emergency fund at least cuts down on the amount you’ll have to borrow or finance.

Then, be prepared: After a crisis, the sacrifices you have to make to rebuild that fund might feel painful. But having the money will feel like a blessing the next time life plants a surprise in your path.

That said, when you travel you should probably bring your own Tums.

Veteran personal finance writer Donna Freedman is the author of “Your Playbook for Tough Times: Living Large on Small Change, for the Short Term or the Long Haul” and “Your Playbook for Tough Times, Vol. 2: Needs AND Wants Edition.”