Emergency Fund: to have or not to have?

Lately, I’ve been reading a lot about emergency funds and savings accounts, and whether there is a real need for them while paying off your debt.

Personally, I don’t have an emergency fund because I put every spare penny towards my debt. I have always thought that if there is debt to be paid off, you are supposed to throw everything towards it and you only start saving once your debt has been paid off in full. That said, a lot of personal finance bloggers have an emergency fund or a savings account that some of their money goes to each month. It got me thinking, is there a real need for it?

Without a doubt, an emergency fund comes in handy when unexpected expenses arise. Whether it’s an emergency dentist appointment or redundancy, knowing that you have some money set aside for a rainy day is always comforting.

On the other hand, if you have debt and the interest rate is sky-high, would you not want to pay off your debt first and pay as little in interest charges as possible? As useful as emergency funds can be, the idea of paying huge interest rates but adding to the emergency fund at the same time is quite unsettling.

What is more, it can be hard to avoid temptation of using some of the money from the emergency fund on one of the impulse purchases as the money’s “sitting there anyway“. Unless, of course, you are extremely disciplined (which in all honesty I am not) and can forget about the existence of your emergency fund until a real emergency arises.

I won’t set up one just yet. Perhaps, a little later when I am well on my way to debt freedom.

Do you have an emergency fund?

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  1. Hi! I had very similar thoughts when I first started out! I am doing without the emergency fund but only because I am trying to pay off my debt in 8 months, if I was working off a longer time frame I would have an emergency fund…I have got caught out (in April) and needed to re-draw from my credit card, which wasn’t fun!

    1. Hi, thanks for stopping by 🙂 I have decided to open a savings account after all, I am not going to put too much away, just a little something whenever I can. You’re doing great, I wish I could pay off my debt in 8 months, I would be over the moon! Not long now, you’ll be debt free very soon! 🙂

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