A Single Parent’s Guide to Building an Emergency Fund

Imagine getting hit with an unexpected cost like a car repair that will cost you thousands or a medical bill that’s not covered by your insurance. What if you suddenly lost your job? Do you have enough to survive the next few months?


For those unanticipated expenses, an emergency fund or a “rainy day fund” will help you get through those tough days. With savings in the bank, you minimize the impact an unexpected expense can make on your operational budget.


An emergency fund will also save your bacon if you ever lose your job and your severance package was a mere 3 week payout.


Having emergency savings will give you the security of meeting all your payment obligations without too much discomfort and disruption to your accustomed lifestyle.


But how does a single income family save for the rainy days? The rising cost of living combined with stagnant wages has made saving very challenging for everyone but most importantly, for single parent families.


How much do you need to survive? It depends. Some may advise that 8 months of salary is sufficient. While others may feel that 9 – 12 months feels more secure. It really depends on how much you make and how much your expenses are each month. If you make a six figure salary and live frugally, then you may only need 3 months of salary saved. If you make minimum wage, you may need to save up for a longer period of time to achieve your goal.


Set a goal that is achievable and realistic so that you can also save for other things in the future, like a vacation, your child’s school tuition, a new car etc. So if you decide that 6 – 9 months of savings is comfortable for you in case the unthinkable happens, like losing a job, and it takes between 6 – 9 months to find a new job, then aim to save for enough to cover living expenses over the 6 – 9 month period.


The rule of thumb for saving has typically been 10 – 15% of your net income. So if you net $5000 per month, save between $500 – 750 per month times. If you save for 6 – 9 months and your expenses are $3000 per month, then multiply $3000 x 9 months = $ 27,000. Then divide by the amount you are setting aside each month, which is $500, to get the number of months it will take you to save your emergency fund. In this case, it would take you 54 months or 4 ½ years to save. Yes, it is quite the commitment but in the end, it will give you peace of mind.


The 10% rule

Set aside a minimum of about 10% of your net income (take home pay) each month as an emergency savings. Prioritize your contribution to an emergency fund over a retirement savings fund first because you may have a crisis a lot sooner than you retire.


Separate Bank Account

Separate your savings account from your operations account. By managing your money in separate accounts, you are not dipping into the savings to fund your day-to-day cost of living.


High Interest Savings

Keep your money in a high interest savings account that rewards you for keeping your balance high and penalizes you for withdrawals. This way, you are not tempted to be withdrawing from the account.


Keep it Liquid

You may be tempted to invest your stash of cash but there is a reason why it is called an emergency fund. You need to be able to access it when you need it and not get penalized in some way for withdrawing it.


Side Jobs

If saving money from your regular pay is tough and you have an ability to take on some side work, like consulting, then put aside the money you earn from this work to accumulate your emergency fund.


Sell Things

Another way to accumulate your emergency funds is to sell things you don’t need that still has value and is in working order. Examples of these could be appliances or electronics you just don’t use. Hold a garage sale or advertise them on Craigslist, Kijiji or Ebay.


To calculate what you need to survive, try using this calculator. If or when it rains, just hope it’s not a monsoon.

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