The best thing about losing my job? I learned to start an emergency fund
Layoffs. It’s a word that can frighten even the most financially secure person. Oftentimes, they are unavoidable, unpredictable, and unfortunately, way too common. I moved to New York City fresh from college graduation, and less than a year into my new job, became a layoff statistic.
My situation was shaky: I was less than halfway through my apartment lease, and although I had been careful not to spend my entire paycheck every month, I did not have a separate emergency fund. Whoops.
I was kicking myself over that, but it is fairly common. A new Bankrate.com survey finds that not saving enough for emergency expenses is the second biggest financial fumble cited by young adults.
When 18- to 29-year-olds were asked, “What is your biggest financial regret?” their No. 1 response was: “Taking on too much student loan debt.” But “not saving enough for emergency expenses” was close behind.
An emergency fund? What’s that?
An emergency fund typically consists of enough savings to cover 4 to 7 months’ worth of expenses. Experts recommend starting your fund with small goals — like saving $1,000 — and then working your way up.
While I was working, I lived within my means, bracing myself in case things went bad. (But being responsible meant flinging my money around recklessly at bottomless brunch only once a weekend instead of twice.)
With no emergency savings, I could afford to live in New York for only 1 or 2 months before I’d really have to worry. An emergency fund would have provided enough money for me to comfortably job-search while not falling behind on bills.
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Ignorance isn’t so blissful
When I told my friends what had happened and that I was, once again, available for hire, I could see them shudder as they probably wondered what they’d do if they were me. As a millennial, I know too many young professionals who abide by the same money management strategy I followed: Avoid looking at your bank account, and hold your breath until the card successfully swipes.
It’s funny. Until it isn’t.
As a college-educated young professional, I was making enough money to be able to set aside an emergency fund without having to go hungry or miss out on a fun social life. I had no excuse for not saving!
Now that I’m employed again and have a steady income, I’ve started putting money aside for emergencies, using self-discipline. Yes, I have a little bit less money to spend on shopping and nights out with friends, but knowing that I have financial security in case things go awry makes it so worth it.
‘You can never save too much’
A good friend of mine learned the hard way, as I did, about the importance of an emergency fund. He had been working on the East Coast as a clinical researcher for less than a year before he was — swiftly and mercilessly — laid off. Although he said losing his job wasn’t too traumatic because he was only 23 and didn’t have a mortgage or kids, it did teach him a lesson about the importance of being financially prepared for the worst.
“While I did have some money saved, getting laid off taught me you can never save too much,” he admitted to me. “By the time I got my second job, my bank account was pretty dry. I put almost double in my 401(k) now, and automatically deposit a portion of my paycheck to savings each month.”
When you’re young, it’s easy to feel invincible and to want to spend all your money on fun trips with friends or a pair of ridiculously expensive shoes.
An emergency fund may not be a priority; it won’t exactly rack up the likes on Instagram. But it does provide security and peace of mind.
