The Struggling Student Rants—The Great Emergency

Life emergencies happen.  We have all dealt with Murphy’s Law—if anything can go wrong, it will—at one point in time.  A furnace that breaks down in the middle of a prairie winter is bound to happen once in your lifetime.  A vandal slashing all four tires of your car, in a highly condensed, populated area such as Toronto, should not be a surprise event.  These emergencies don’t give you time to adjust your budget.  They demand funds immediately.  These things can also easily cost thousands of dollars and push your mental health over the edge if you’re in a tight financial spot or have other stressors to deal with.  In the past, my “emergency funds” were my credit cards or line of credit.  That’s how my parents handled finances, so that’s the tactic they passed down to me.  I would cover the emergency using my credit, and eventually pay it back twofold with all the interest charges and fees.  I don’t blame them, they didn’t know better and they worked with what they had; they winged it.  In the age of the Internet, however, we all should know better.

Having the necessary cash set aside to handle life shouldn’t just be something handy to have when something goes seriously wrong.  An emergency fund will (i) save your butt in your time of greatest need; (ii) really, really, really reduce your stress levels, especially if you’re dealing with anxiety issues (Ain, Iwry & Newville, 2018); and (iii) keep your ship from sinking in the storm.  If you’re struggling to pay off everyday bills, it can be tough to have money just sit in your bank account untouched.  I’ve been there and felt the same.  Nevertheless, my family is a living example of how having this money set aside can save the day and keep you away from the loan sharks when Murphy drops by unannounced, whether it’s just for a short visit, or a long-term stay.  You see, Murphy is a social butterfly; he likes to visit all sorts of folks, both wealthy and struggling.  Having an emergency fund is the equivalent of paying for Murphy’s bus-ride out of town, so he doesn’t become a permanent resident sleeping on your couch.

Many financial experts, including the Financial Consumer Agency of Canada (FCAC), recommend three to six-month household expenses set aside, for your emergency fund.  This way, in the event of a major misfortune such as suddenly getting let-go at work, you won’t have to worry about going bankrupt (2017).  Rather than stressing about bills, you will have the luxury of taking your time to find a great job, rather than having to pick up as many shifts as you can at McDonald’s.  When I first read this, I rolled my eyes and thought these people need to get off their high horse and see what reality for us villagers is truly like.  However, this vision of a future filled with peace of mind tweaked my curiosity, so I looked into it a bit more.  Three to six months’ expenses can seem like a lot of money for most.  But if you’ve been money-savvy from the start, and already have this amount set aside, you don’t need to keep reading this.

However, for those struggling to pay for AU tuition and feed the kids simultaneously, this amount can seem impossible.  It could take years to save this amount up.  That’s where the mini emergency fund comes in–a smaller amount set aside for the sole purpose of fending off Murphy.  Start with a realistic goal, such as $1,000-$2,000.  If this amount also sounds daunting, break it up into six months or six pay periods.  It won’t seem as overwhelming.  The mini emergency fund also teaches the art of patience and letting your money simply sit there, without spending it.  While this money sits there, you may be thinking it’s not serving a purpose.  Do you think the same applies to your antivirus software or your car insurance?

If you’re having a hard time cutting corners to come up with this amount, find a way.  Do whatever it takes to put this amount together–babysitting for friends and family; selling your long-forgotten clothes that are now spilling out of your closet; or picking up extra shifts at work.  When there’s a will, there’s a way.  Throw every extra dollar you can find into this project, whether it’s five dollars or fifty.  Look at your budget and figure out what you can eliminate for a while, such as the $8.00 daily Starbucks.  Buy your Starbucks one day a week and bring coffee to work with you for the remaining days.  This way, you won’t feel like you are making any big sacrifices.  Take advantage of every opportunity to get your first mini emergency fund going.  Separate, small, automatic deposits from your pay will go unnoticed and add up before you realize it.  It doesn’t have to be a large amount; it can be something as simple as $5.00 per pay period.  Come tax refund time, skip going on your annual cruise and throw that money into your emergency fund instead.  It will be a one-time sacrifice, which you may regret for a short time; however, you will be thankful once you complete your mission and can breathe a big sigh of relief.

This mini-emergency fund isn’t solely about the $1,000.  We all know this won’t get you far if a real emergency hits.  It’s about getting through any obstacles life throws at you.  It’s about moving past that amount and aiming for more.  Before you realize it, you will have $2,000 set aside, and, eventually, even the full-recommended six months’ expenses may even suddenly show up.  It’s about the start and learning how to be responsible with what you earn.  Because if you struggle to leave these small amounts untouched for what truly matters you will struggle financially, even if you win the lottery jackpot.  An emergency will come up, sooner or later, and you will be thanking yourself for setting this fund up, despite any setbacks.  Suddenly this money won’t seem so useless.  Just make sure it’s an actual emergency.  Don’t mistake an emergency for a convenience, or something you failed to plan for.  Christmas and back-to-school shopping are not emergencies; they come around every August and December and should have been in your budget.  If they weren’t in the past, add them in now.  Unless life throws you a real curve-ball, and we all know what those look like, do not touch your emergency fund – grow it!

References
Ain, J., Iwry, J., & Newville, D.  (2018).  Saving for Now & Saving for Later: Rainy Day Savings Accounts to Boost Low-Wage Workers’ Financial Secutiry.  Retrieved from https://prosperitynow.org/files /PDFs/Saving-for-Now-Saving-for-Later-Rainy-Day-Savings-Accounts-to-Boost-Low-Wage-Workers%E2%80%99-Financial-Security.pdf
Financial Consumer Agency of Canada (FCAC).  (2017).  Setting up an emergency fund.  Retrieved from https://www.canada.ca/en/financial-consumer-agency.html
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