As anyone who writes about money, I sound like a broken record when it comes to having an emergency fund.
The rule of thumb is to have 3–6 months’ worth of expenses saved, just in case. And I’ve been lucky enough to never need mine, until earlier this year.
I’ll say right off the bat, as far as emergencies go this one was pretty minor. But it proved to me how much of a difference having an emergency fund can make.
I had spent a week visiting Paris and very late on my last night there, just as I was going to bed, I got a notification that my train home to London early in the following morning had been cancelled.
My mind was suddenly flooded with all the things I had to do.
First, I jumped online to rebook for the next available train, which turned out to be the day after I was originally due to come home.
This then meant I needed to book a hotel for the extra night, and was lucky enough to be able to extend my stay at my current hotel rather than having to move somewhere else.
Finally I had to tie up other loose ends — letting my friends, family and work know of the delay.
All in all, a stressful way to end the night. But it wasn’t until the coming days and weeks that I realised the impact my emergency fund had on how I felt that night, and in helping deal with the issue.
The Practical Impact
First, my emergency fund helped with the practical impact of this delay. I found out later on that the train company’s policy is that they will reimburse passengers for any costs incurred as a result of a cancellation or delay, including accommodation and meals.
And if reimbursement wasn’t offered, I would have made a claim against my travel insurance (which you should never travel without).
However I still had to pay for these items out of pocket up front. Now you’re probably thinking “Why not just put it on your credit card if you don’t have an emergency fund?” — I did in fact pay for this on my credit card, but it’s nearly two months after the delay and I’m still to receive the reimbursement. And in that time my monthly credit card bill has been generated and was due for payment.
My reimbursement is in progress, but it’s slow. And this would also likely be the case if it was a claim against travel insurance.
If not for my emergency fund, I’d be on the hook for any interest for the expenses until the reimbursement was received.
My emergency fund helps me fill that gap while I wait for my money to get through all the red tape, and I’m not going to be worse off for it.
The Emotional Impact
Second is the emotional impact of having my emergency fund. And this didn’t hit me until I was having breakfast the following morning.
I realised that when I found out I had to stay an extra night, with all the things that were running through my head, how I was going to afford it wasn’t one of them. It didn’t even cross my mind. And this is even before I knew about the reimbursement, or that travel insurance crossed my mind.
At that moment, I knew I could sort it out myself. I’ve had my emergency fund saved up and ready to go for long enough that it must be embedded in the back of my brain, adding calm to any stressful situation.
As I said earlier, as far as emergencies go, this was a minor one. But knowing that in any future emergency situation that I don’t have to worry about money is a very comforting thought.
Your emergency fund doesn’t just help pay for unexpected things — it’s a safety net that helps you put your mind at ease in times of stress. It’s one less thing you have to worry about — a comforting gift you can give you your future self.
This article is for information purposes only and are my own opinions and views. This is not financial advice and you should seek professional advice.