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A good emergency fund is more than money

An easily accessible stash of cash is great when you're faced with unexpected bills or events. But you need more than that.

By MSN Money Partner May 12, 2011 6:49PM

This post comes from Trent Hamm at partner blog The Simple Dollar.


I often talk about emergency funds and how useful they are. Here's a quick summary for people new to The Simple Dollar:

An emergency fund is a pool of money you can easily access to take care of short-term problems in your life, such as a car repair or paying bills during a short period of unemployment. A good emergency fund is liquid (meaning you can easily withdraw the cash when you need it) and doesn't put the balance at risk. Thus, a savings account is a great place for an emergency fund.

However, I've come to realize thatcash is just one small part of a successful emergency fund. A true emergency fund is broader. It's any resource that helps you survive an unexpected event in your life.


Here are some tools everyone should have in their "emergency fund": Post continues after video.

Life skills. Can you change a flat tire? Can you fix a broken toilet? Can you grow your own food? Can you prepare a decent meal at home? The more skills you have along those lines, the easier it is to survive during an economic downturn or a natural disaster.


Professional skills. Are you an effective public speaker? Are you a good time manager? Are you good at managing information? Do you have marketable skills, like the ability to rebuild an engine? These will all help you if you're trying to put a career back on track after a job loss.


Completed work. Many times, an emergency has come up -- a sick child, for one -- and I've had to rely on already-completed articles when I can't write for a few days. At my previous job, I had many scripts and other tools set up so that, if an emergency occurred, some of the key parts of my job could easily be handled remotely. What things do you have "in the bank" in case of an emergency? 


Relationships. Do you have good relationships with a lot of people in your field, particularly those who work for other employers? Do you have a wide array of friendships in your community and in other locations? Those relationships will provide a safety net for you when you stumble -- and eventually, you will stumble.


Insurance. Do you have health insurance? Do your family members? Do you and your family members have life insurance? Have you considered long-term-care and disability insurance? What about umbrella insurance? When things go wrong, insurance can take the venom right out of a snakebite.

Reserves. We buy in bulk, not just so that we'll save money on each item, but so that we'll have items in reserve in case something happens, like a severe financial shortfall or a natural disaster. What do you have on reserve in your basement?


Energy. I learned long ago that robbing Peter to pay Paul via not sleeping enough almost always leads to regret. I work with less quality, I'm cranky, and I don't handle crises well. Sleeping well at night and getting adequate, well-balanced nutrition contribute to an emergency fund of health, alertness and well-being.


Every day, we're given many chances to prepare for whatever may come in the future, good or bad. A little bit of preparation now can make the future a lot less painful without sacrificing any of the opportunities of today.


More on The Simple Dollar and MSN Money:

May 19, 2011 7:39PM
I like the idea of the emergency fund involving more than money. Many of the suggestions here would help in a crisis, especially in the areas of  life skills and professional skills. These are often things we don't think about until the actual moment of crisis, and being prepared can always alleviate any sense of dread.



Jun 4, 2012 8:14PM
An emergancy fund is just a common sense thing to do, The Boy Scout motto is plenty good advice "BE PREPARED" for any eventuality, Extra food, extra money, a solid family plan to meet at a certain location, and a GUN to be sure that no one takes any of it away from you. My neighbor lived in New Orleans during Katrina He's a professional in Survival measures. Had he not been prepared he would have never survived the roving bands of looters and thugs even some of the cops were outlaws at that terrible time. Being prepared saved his families bacon..
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