Why Women Need Their Own Emergency Fund - The Hopman Group
 

Why Women Need Their Own Emergency Fund

Why Women Need Their Own Emergency Fund

emergency fund

Life is good. Everything is going so well in life right now. You just moved up in the company you work for, you’ve got a great new place close to where you work. Maybe you’re hoping to get married, or perhaps there’s a new baby on the way. Everything is just the way it should be.

And then, it’s not.

Suddenly, the job you loved so much is no longer in need of your position, and you’re laid off. You don’t have a way to keep paying your rent, let alone save for a wedding or expanding your family. What if something worse happens, like a faraway relative passing away, injury to your spouse or kids, or catastrophic damage to your house or car?

How will you survive until you find a new job? The answer will depend on how well you’ve been about contributing to an emergency fund.

Why an Emergency Fund?

It’s important for every family to have an emergency fund in the event that the unexpected strikes. If one spouse loses a job, and the other spouse’s income is not sufficient to keep the family afloat, there should be an account from which to draw for expenses until a new job is found. It’s also an account that will be there when the water heater blows, one of the kids heads to the emergency room, or the car just won’t pass another year’s inspection.

But what if you are a single woman, living on your own? The super in your building takes care of the appliances, you’re fit as a fiddle, and your car’s brand new. Is it really necessary to pull at your already thin paycheck “just in case”? Yes. Something can always happen.

 But, Why Women?

How many women can really say they are in control of their finances? Not enough, considering that nine out of ten will be on their own at some point later in life, especially since a woman’s life expectancy is generally longer than a man’s. Throw in the fact that women spend, on average, fewer years working and mostly for a lower payrate, women need an especially strong emergency fund. When a woman is left as a widow, she will need a backup source of income while she takes time to work out the rest of her life’s financial situation.

Where?

The most important thing about your emergency fund is that it should be extremely accessible and liquid. The very nature of emergencies is that you never know when one will arise. Keeping your extra money in stocks is very risky and using bonds may require a waiting period that is longer than you need it to be. Savings or checking accounts can help the money come right back out when it’s time to access it.

It’s not something that should be hidden. On the contrary, it is important for the people in your life to know about all financial assets, including the emergency fund. Otherwise, you might have money in a safe place that will remain safe forever.

How Much?

Most experts recommend having around six months of your average living expenses saved. That’s not a hard and fast rule, mostly because lifestyles vary.

How do you figure out what six months’ expenses looks like? If you keep to a household budget, it shouldn’t be too hard. If you don’t, it’s highly encouraged to start one. You’re only considering expenses, so after looking at a month’s budget, you can toss out taxes related to your salary, as well as any job-related expenses, such as gas to get to work or lunches out. The idea is that during this six months, if you have lost your job, you will be looking for a new one, so be sure to keep anything related to a job search.

However, the amount of money you have saved for an emergency fund is a person’s own choice. If you work in a job that has a flexible income, you may want to put more away when times are good to help when things slow down some. Or, if you can think far enough ahead to just live on the bare minimum for a while, you can save up so you’ll be in great shape when the inevitable strikes.

We aren’t trying to scare you, but rather prepare you. What’s the worst that could happen by putting a little extra money aside? You may miss a few dinners out or a concert. Working with a professional financial advisor can help you plan for these possibilities without changing your way of life. Reach out if we can be of help.