Using Emergency Fund Milestones is one of the best way to stay motivated while saving 3-6 months of your necessities for your emergency fund. I’m not talking about just any milestones, but ones that mean something to you. If you had to take your child to the ER, how much would that actually cost? Or if you lost your job, how much would you need to make ends meet? These are the heart-tugging realities of what your emergency fund is for. So how do we not lose sight of what this money is being saved up for?
Create Milestones with a Purpose
Creating emergency fund milestones for your savings goals is a great way to help you find purpose in why you are saving for. An important tip when creating your emergency fund milestones is to list out potential uses for your emergency fund. Then calculate how much they would cost you based on your real-life situation.
Here are a few emergency costs to consider before creating purposeful milestones:
- An ER hospital visit, How much would this cost under your healthcare insurance?
- Family funeral expenses. How much does a funeral cost and how much would you have to chip in if need be?
- Job loss. How much do my bare minimum essentials cost, and how many months would my savings hold me up?
- Urgent home appliance repair. How much do appliance repairs cost, and how much does a budget-friendly option costs?
- Transportation & lodging costs. How far would you have to travel in case of an emergency, and how much would that trip cost?
I know some of these examples may be far-fetched for you. But the goal here is to focus on picking one or two emergency situations that move you to take action. This way, when you’re feeling discouraged, you can quickly remind yourself of the importance of building up this safety net.
Emergency Fund Milestone Example
To put this into perspective, let’s break down a trip to the ER on an ambulance. Now under your current health insurance, this might cost you a total of $600. For me, knowing that I can call 911 and choose the fastest option to get to a hospital is life-changing. If that situation does arise, I want to feel confident that I can afford it. We’ve all heard stories of people refusing to call 911 because of the medical expense. Let’s remove that fear by making that $600 a primary emergency fund milestone.
Once you save $600, this doesn’t mean you stop saving for your emergency fund. It’s a milestone that you can check off while on your journey towards saving your emergency fund.
Small Savings Matter
Your emergency fund milestones don’t have to be big-ticket expenses. You can do the same for small necessities like your cell phone bill. Simply knowing that saving $100 towards your emergency fund will solidify your access to a working phone and an internet connection is big. If you lose your job, you can apply for unemployment right on your phone, do an interview, and even start a business. No matter how big or small you make your emergency fund milestones, make saving $100 worth it to you.
There are Levels to your Emergency Fund
As someone who’s been through multiple back-to-back family emergencies. I must say one of the biggest lessons I’ve learned about saving money is that once a life-changing situation presents itself, nothing else matters. Your focus and discipline to save money are much deeper than what vacation you’re going on next or what your investments look like. None of that matters as much.
What feels right during those difficult moments is to be there for your loved ones, provide security, and focus on the moment. Having an emergency fund allows you to focus on the emergency and not the money. These are the deeper levels of why having emergency fund milestones that mean something to you is so important. Because life may present you with the temptation to spend your savings on a new purse or a spontaneous trip. But you need to remind yourself of your top priorities. Which is creating a financial safety net for you and your family by accomplishing your emergency fund milestones as soon as possible.
As a closing thought, I want to remind you that it doesn’t matter how big or small your milestones are or in what order you place them. Just make sure you are saving with purpose and you’ll find yourself accomplishing your goals in a much quicker timeframe than expected.