Rethinking Emergency Funds
By Litsa D | Last updated on June 12, 2026 | Published on October 26, 2025
How to Save for the Real Emergencies in Your Life
Building an emergency fund sounds simple in theory until you try to do it in real life. For years, I understood the concept of a financial safety net, but I struggled to keep my emergency fund intact. I dipped into it for non-emergencies, convinced I’d “save more later.” If you’ve been there too, you’re not alone.Many people want financial security but feel stuck on how to actually build it. And often, the sticking point isn’t knowing what to do — it’s figuring out how this actually applies to your specific numbers and situation.
Below, I’ll show you a more practical way to think about emergency funds, along with clear categories, examples, and steps to make saving feel doable instead of overwhelming.
What Is An Emergency Fund?
An emergency fund is money set aside for unexpected expenses. They are the urgent, unwanted situations you didn’t plan for. But what qualifies as an emergency varies widely.
Your emergencies might look different from mine. For example:
I live close to family.
I own both a house and a car.
I don’t have children or pets.
Someone else might have more dependents, fewer safety nets, or different responsibilities. That means the emergencies they need to prepare for will differ.
Why You Need an Emergency Fund (Expect the Unexpected)
Emergency funds exist to protect you when life throws something unpleasant your way such as an ER visit, a sudden car repair, a tree on your roof, a job loss, or any major unexpected expense.
We save for:
Peace of mind
Reduced financial stress
Security during unpredictable moments
And yet, despite the benefits, research shows that many adults are unprepared. Bankrate reports that only 47% of U.S. adults can cover a $1,000 unexpected expense from savings. 1
Why Saving for an Emergency Fund Is So Hard
I technically had an emergency fund for years. But 90% of the time, I didn’t use that money for emergencies. I used it to pay credit card bills. I used it for impulse buys or the expected but infrequent expenses like annual renewals. I used it because it was there.
Why?
Because “emergency fund” was too abstract. It didn’t feel real or specific. I told myself I’d replace the money later. When I added more to my emergency fund, I’d just use it again. I cycled between “why bother” and guilt for spending it. It was a vicious cycle.
Once I shifted how I named and organized my savings, everything changed. I stopped dipping into my emergency fund because I created more concrete, meaningful categories.
This is where a lot of people get stuck. Not because they don’t care but because their system doesn’t reflect real life. And when your system doesn’t feel connect with the season of life or the goals for future you, it’s hard to trust your decisions or stick with them.
Your New Emergency Fund System
Instead of one vague emergency fund, break your savings into more realistic, clearly defined categories. This makes it easier to know:
✔ what you’re saving for
✔ how much to save
✔ when it’s actually okay to spend it
Below are the categories to consider and what to think about for each one.
1. Car Repairs
Car repairs are one of the most common unexpected and expected expenses. We don’t know when we’ll need the money, but unless you’re very lucky or frequently get a new car, you will need money for car repairs.
Consider the following and create a goal to save for your future car-owner self:
What is the age and mileage of your vehicle?
What is the average cost of repairs in your area?
2. Dental & Medical Emergencies
Medical costs vary widely depending on:
Do you have dependents?
What does your insurance coverage include?
What are your existing conditions?
If you’re responsible for the health needs of children or family members, you’ll want to increase your savings goal.
3. Emergency Travel
Think through:
Who you would travel to in a crisis? For instance do you have college-aged kids or aging parents?
How far away they live?
Would you need same-day or next-day flights? Will you need a rental car?
Will you need a hotel or other accommodations?
Don’t forget food and other necessities.
Emergency travel can be very expensive so planning ahead reduces stress. Think, “This is scary but I put money aside for this so I can take care of _____.”
4. Home Repairs & Home Emergencies
If you own a home, this category is essential.
This isn’t an exhaustive list but it will get your started. And no, we cannot account for everything that could happen but here are the more common issues that arise.
Plumbing issues
Roof repairs
Appliance breakdowns
Electrical problems
Storm or weather damage
Even renters need some savings here because landlords may not cover everything.
5. Income Reserve (Job Loss or Variable Income)
Here’s a different kind of emergency: Loss of Income. If that occurs, what are your essential expenses, what I call your Foundation plan.
Rent or mortgage
Utilities
Food
Tansportation
Insurance
Medication
Debt minimum payments
A little for fun and entertainment.
If you have a variable income (like coaching, freelancing, or gig work), this category is non-negotiable.
6. The Unexpected (A True “Rainy Day Fund”)
This is a catch-all category for what doesn’t fit neatly anywhere else. Life happens and you can’t plan for everything. This was the first category I funded, and I recommend starting here. I keep $1000 in mine. Yes, the amount is a bit cliche but I find that it feels good once $1000 is in the bank account. You can pick whatever number fits your lifestyle.
Other Categories to Consider
Depending on your life circumstances, add:
Pet emergencies
Additional property or vehicle repairs
Natural disaster/evacuation fund (especially if you’ve been evacuated or told you might be evacuated before)
What Is Not an Emergency?
To protect your emergency fund, be clear on what isn’t an emergency. These are called sinking funds. You’re putting some money (sinking) into a fund for the things that will happen but you don’t know when. Sinking funds can be for fun things too but for our purposes here, we’ll stick to foundation-related funds.
Not Emergencies:
Routine car maintenance
Expected tire replacements
Predictable appliance replacements. If you have a dryer, it will conk out on you at one point.
Clothing replacements
Annual expenses you could plan for
If you know it’s coming, even years away, it’s a sinking fund, not an emergency.
Emergency Funds Are NOT Enough: Here Are Two More Safety Nets You Need
To stop dipping into your emergency fund, add two additional layers:
1. A Miscellaneous Category
A small ($25–$50) buffer in your checking account for random “life happens” moments:
Surprise fees
Forgotten expenses
Minor overages
Unexpected small purchases
Odds and ends like postage stamps
Maybe you’ll want to keep more money in this category. Start small. You can always add more later if you realize that fits your life better. The category is your first line of defense in preventing unnecessary withdrawals from your emergency fund.
2. A Savings Buffer
Keep $250–$500 in your savings account. Ideally you have a high yield savings account (HYSA) linked to your checking account. This is my money for the “oh crap, I forgot this” or “Oh, there is a sale on the item I’ve had on my wishlist and it makes sense to get it now.” Maybe this wouldn’t work for you but I like having an extra layer for that whatevers that come along.
Where to Keep Your Emergency Savings
Speaking of high-yield savings account, store your true emergency fund in one so it grows while staying easily accessible. Your buffer and miscellaneous categories can stay in checking or basic savings. I use to HYSA. One for emergencies and income reserve and one for other sinking funds.
There are several options for HYSA. I use Ally Bank but do your research what fits your preference and lifestyle.
Tip: You may already know but just in case, my preferred budgeting tool is YNAB. I love it so much I became a certified YNAB coach. But I stopped tracking my emergency funds in YNAB. I find the “out of site, out of mind” method works better for me. I use Notion.
Make Saving a Habit (Start Small, Stay Consistent)
Notice I’ve talked about setting your goal for the categories above. This process is not able putting pressure on yourself to save a lot now. You also want to consider retirement savings through an employer.
You do not need to save for every category at once. If you’re saving for home repairs but a family member needs help, use the money. Ultimately the money is for emergencies. So use it when needed. The different categories are tools to help you save and keep that money for true emergencies.
If you don’t have an emergency fund yet, and feel it’s too overwhelming, please start small:
$1 a week
$5 a month
whatever you can manage
If you’re just starting to build an emergency fund (or restarting), this period is less about the amount and more about the habit of saving.
Expect the Unexpected — and Trust Yourself
Saving for emergencies isn’t about living in fear. It’s about feeling grounded and prepared. Call your fund whatever works for you: an emergency fund, rainy day fund, safety net fund. You’re in charge. Most of us will be saving for a long time, and that’s okay. Start where you are. Save what you can. Adjust when life changes.
Your financial peace is worth it. You’re worth it. You got this.
If You Want Help Applying This
If you’re reading this and thinking: “This makes sense… but I’m not sure how this should look for me,” that’s exactly where most people get stuck. Contact me my filling out this quick questionnaire and we’ll find some time to chat. You can also review my services here.