Grow Your Family’s Emergency Fund

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When you’re young, free and single, having an emergency fund to tide you over should you need to repair the car or buy a new washing machine doesn’t seem particularly important, especially when you could be spending your cash on designer handbags, beach vacations or fun nights out at the local bar. When you’re a parent, however, it’s a different matter completely.

When you have other people depending on you for their food, shelter, and safety, you really do need to get smart about your finances, and an emergency fund becomes an essential part of your budget. If you don’t already have an emergency fund, or if you have set one up, but it is looking pretty pathetic, here are some tips to help you grow your family’s emergency fund starting right now:

Start Now

There is never a bad time to start a family emergency fund. In fact, do it right now, even if you only have 10 dollars to spare, go down to your bank and open up a new savings account, deposit that $10 and set up an automatic payment to add another $10 next month and the month after, if that’s all you can spare. It will soon add up, and your family will have more peace of mind in knowing that you are working towards building your savings.

Start with Small Goals

When you’re starting to build an emergency fund, you should start with a small goal, such as saving $1000. This will make the process more manageable, and because you won’t find it too unrealistic, you won’t give up before you’ve really got started. You might think that because finding fast loan shops is so easy, that you really don’t need any savings, but when it comes to your family’s finances, the more options you have, and the safer those options, the better for all of you. Loans have their place, but they shouldn’t be a total alternative to savings, so start small, keep building and your family will be more financially stable than ever before in no time at all.

Diversify Your Portfolio

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If you already have an emergency fund in place, and you’re adding to it each month, you might want to think about growing your fund by diversifying your portfolio. I know it can be scary if you haven’t had much experience of dabbling with the stock market before, but if you stick to low-risk stocks, diversify your portfolio and take regular financial advice, your modest emergency fund will continue to grow and look after you as your kids grow up and eventually head off to college.

Create a Household Budget

A good way to divert more money to your emergency fund and any other savings you might have, is to take an honest in-depth look at your whole family’s incomings and outgoings each month and then to draw up a budget, which cuts out anything unnecessary (you can have a few treats) leaving you all with more money to play with at the end of the month. You can then use some of this ‘newly-found’ cash to build up your emergency fund so that you won’t have to worry about finding money to pay for the cat’s treatment or to ensure that you can keep your car running when it runs into problems.

Aim for at Least Seven Months’ Salary

It might seem daunting right now, but many financial experts believe that the average American family should try to build up an emergency fund which is equal to at least 7 months’ salary – that includes both you and your spouse’s salary if you’re both working – so that you have a good buffer should you find yourself with a serious financial emergency on your hands, such as being unexpectedly out of work.

Don’t Neglect Your Debts

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Although building an emergency fund for your family is very important, you should not do so at the cost of paying off your debts. You also should not neglect to build up an emergency fund until you have dealt with your debts. What I would suggest is taking measures to minimize the amount of interest you have to pay, either by taking advantage of 0% balance transfer offers or consolidating your debts with a low-interest loan. Then, you can split any spare cash in your budget between paying off your debt and boosting your emergency fund.

Of course, if you have a high-interest debt, and there’s no way of changing that, diverting most of your money to paying that off would be sensible, but at least try to divert a little to your emergency fund because, if you don’t you could end up even more in debt, if an emergency does strike your family and you have no other way of covering it than to use credit.

Make it a Bill

When you’re trying to save money into your emergency fund every month, one of the things that really helps is to make it a bill and add it to your budget. If you treat it just like a phone bill and set up an automatic money transfer between your current account and your savings account, you won’t miss it so much, and you won’t end up not paying into your savings because you don’t feel like it or because you’ve been tempted by a new pair of shoes.

Review It

At least once every year, you should sit down and review your emergency fund to see how well it is performing. It might be that the account that was once giving you a great rate of interest isn’t performing so well, or that you could get bigger returns by diversifying your portfolio in another direction. It might also be that your budget is no longer the same, and you’re able to add more to your emergency fund, and knowing about this will help you to grow your fund more effectively.

Use it For Emergencies Only

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It’s called an emergency fund for a reason, so don’t be tempted to dip into it to buy Christmas presents for the kids or to treat yourselves to a vacation. Sure, it’ll feel good in the moment, but when your fund is depleted, and the dog needs surgery, it won’t feel so great!

Does your family have an emergency fund? How do you ensure its growth over the months and years?


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