8 Reasons You Don’t Have an Emergency Fund

So you don’t have an emergency fund. See if any of these common reasons people give for not having an emergency fund sound familiar to you. And decide whether they make good financial sense.

Personal finance experts agree that consumers need to build an emergency fund. Many are not aware of how easy it is to build an emergency fund. The only limitations are certain misconceptions and sentiments.

Having sampled opinions from several people, I have listed the most common anti-emergency fund sentiments, which are as follows:

1. An emergency fund is not for young people.

The average American between the ages of 18-25 believes that he/she doesn’t need an emergency fund. This is especially true if the young person is living with a parent. The truth is that no one is too young to have an emergency fund. You’re never too young to have an unexpected medical bill or auto repair expense.

Related: Choosing the Best Savings Strategy for Your Financial Goals

2. I need a salary increase first.

You can always say that you don’t make enough to save and will begin saving the moment you get a salary increase. The truth is that most people can save a few dollars out of each paycheck. No amount added to your emergency fund is too small.

3. I have other financial priorities.

It’s easy to say that other matters are a higher priority than assembling an emergency fund. And they will always seem more important until you need the money that should be in the emergency fund. Priorities are a matter of choice. You’ll always have other priorities until you choose to put an emergency fund at the top of the list.

4. I need to pay off debts first.

It’s true. Getting out of debt is essential, but having an emergency fund is important as well. Failure to have a fund to cover unexpected expenses is how many people get into debt. Setting aside some money for an emergency fund even as you repay debts is the best way to avoid getting into debt again.

5. I’ll use my credit cards.

Credit card companies don’t want you to know this, but they’re happy if you run a balance and they can collect interest from you each month. And many consumers find that the first time they carry a balance is when they have to put a large unexpected expense on their credit card. You’ll be money ahead if you save an emergency fund and don’t pay interest to the credit card company.

6. I can always borrow from friends and relatives.

Relying on friend or relative loans is unsure at best. It’s also a great way to strain relationships unnecessarily. If you can’t put money away in an emergency fund today, what makes you think you’ll be able to repay that loan later?

7. I’d rather invest any extra income.

Having an investment portfolio is a great idea. It’s crucial for your financial future. However, financial planners will tell you that you should build an emergency fund before you make investments that are meant for the longer term. Those investments often fluctuate more, and you might not be able to get your money back immediately if it’s needed. An emergency fund is for emergencies that require cash now.

8. I’ll figure out something when it happens.

That’s probably true. You will likely use one of the methods mentioned above, but it will cost you more money and distress than if you had put a little away from each paycheck until you had accumulated a reasonable emergency fund.

• How To Know When To Use Your Emergency Fund
• Finding Money for Emergency Savings
• How Much of an Emergency Fund Do I Need?
• Reduce Your Debt With a “Sinking Fund”
• Your Emergency Fund In Retirement: A Comprehensive Guide

Reviewed October 2023

About the Author

Jeff Cruz has a Bachelor of Science degree in Economics from the Ohio State University.