Saving money for an emergency fund can seem overwhelming and for single moms, it can feel even more challenging. When you’re the only person in your household bringing in the bacon you need to be more protective of your money. You need to make sure you have enough to cover any emergency and unexpected situation that throws you off. I have a lot of single moms in my family and community of friends. We know that being a single mom is tough. But you need to be clear on the direction you’re headed in with your finances. Here are my best tips to help you get your finances right and build an emergency fund.
What’s an Emergency Fund
An emergency fund is simply money you set aside, hopefully in a high-yield savings account, for unexpected emergencies. When we use the term emergency we’re trying to express any dramatic event or problem that arises in your life. Classic examples of emergency situations are job loss, hospitalization, sudden death in the family, or a pandemic happens. These are all life stopping events that require a large amount of cash to help you come to a resolution of some type.
Why You Need MORE
Single moms have more responsibilities, due to being the only person bringing in an income for you and their children. One of the biggest lessons that the 2008 recession and the 2020 pandemic has shown us is that no job is secure. The people who assumed that their job was secure and lost their jobs got hurt more. This is why single moms need more. You need to plan accordingly and assume that no job is secure and work on protecting your cash flow. Because you will get hurt more than the average two-income household if you don’t.
When reviewing my emergency fund chart, you will see that for single moms the target emergency fund should be closer to 6 months. This is a goal you can work up to slowly or as quickly as your situation allows. A good tip here is to set a goal of saving 1-3 months per year for your emergency fund. This way you can consistently work on this goal on a monthly basis without burn yourself out.
Emergency Fund = More Options
Although emergency funds do help during unexpected emergencies and help you avoid going into debt. They touch a deeper part of financial security, it creates the flexibility to have more options. By having an emergency fund you have more than one solution to any problem that runs upon you.
Due to the pandemic, over 2.2 million women had to make a tough decision when schools got shut down, and when daycares closed. A lot of women had to let go of their secure job and seek a more flexible job that allowed them to work remotely and odd hours. Being a caretaker for your kids, elderly parents, or becoming ill made a lot of people realize that life can change overnight. If you have money set aside in your emergency fund, it can help you come up with more than one solution for your current situation. Like supplementing your unemployment benefits, make ends meet if your new job pays less, or pay for additional resources.
How to Calculate your Emergency Fund need
Calculating your unique emergency fund need is a quick mathematical equation that isn’t overly complex. Well, I hope it’s not. The first thing you want to do is complete the first step of the High-5 Banking Method and separate your bills from your lifestyle expenses. You want to become clear on how much your mandatory needs costs without allowing your lifestyle to complicate that. Once you’ve added up how much your bills cost this number will equal 1 month of your bills. This number also equals what 1 month of your unique emergency fund need. Then multiply this number by 6 to get your 6-month emergency fund.
1 Month of Bills = 1 Month of EF
If your bills equal to 2,450 then one month of an emergency fund will equal $2,450. You will have to multiply $2,450 x 6 = $14,700.
An emergency fund isn’t just job loss or money that’s just doing nothing in your savings account. This is your personal insurance money just in case life doesn’t go perfect. Having a fully-funded emergency fund is a form of self-care and opportunity creator. Build your the fund at your pace, but don’t wait until hard times to save for hard times.