Why You Need an Emergency Fund & a Buffer

You can have the greatest budget in the world, but at some point, life is going to throw you a financial curve ball. It might be a parking ticket or a sudden job loss. Either way, you're going to want a financial safety net to catch those curve balls (it's possible I've muddled my metaphor a bit, moving on).

While a parking ticket is an unexpected expense, it is hardly an emergency. Let me repeat an unexpected expense is not necessarily an emergency. Unexpected expenses pop up all the time and if you treat them all like emergencies you'll never have enough saved to handle the big emergencies that do pop up. This is why you need both an emergency fund AND a buffer.

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What is an Emergency Fund?

An emergency fund is a safety net for when things go wrong. It could be you lost a job; your car got totaled, or an emergency medical bill. The goal of an emergency fund is to be able to pay the unexpected expenses without going into debt. You don't want one emergency to be followed by a financial emergency.

How Much Should You Have Saved in Your Emergency Fund

Many personal finance experts will recommend saving $1,000. While I think $1k to start is great, especially when you're in debt, in my experience when it rains it pours. I like to be prepared with enough in my emergency fund to cover 3 emergencies.

I suggest you look at the couple of emergencies you had and average out the cost and then multiply that by three to get your emergency fund goal number. By the way, a speeding ticket is not an emergency; you should be able to cover that with your buffer, more on that later.

How to Save for an Emergency Fund

Don't let your emergency fund goal overwhelm you. Slow and steady will win the race. When I started saving for my emergency fun I started with $25 per paycheck, so just $50 per month. As I got better at handling my finances, I started saving more. Eventually, it became $100 saved per paycheck. Including saving extra when I could and encountering a few emergencies over the course of three years, my emergency fund grew to $4k well on it's way to the $5k goal.

Related: Digital vs Manual: Which is Better for Building Savings?

Use a Savings Game to Kickstart Your Emergency Fund

If slow and steady isn't your thing, you can use a savings game to get started. There are tons of savings games out there, like every time you get a $5 bill you set it aside to save, just save all your $5 bills. I even wrote about how you can easily save over $600 in 5 months never needing to set aside more than $30 in a single day.

Best Tool

Qapital can help you reach savings goals. Once you have the Qapital App installed and a bank account (or in my case three) connected you set up a goal or goals. I currently have two, one to save for taxes #selfemployed and one to save for spending money when I travel hack my way to Paris. Then you set savings rules for each of your goals.

For example, I have a round up to the nearest $2 rule, a guilty spending rule -when I buy Dominos, and a savings rule for every time I hit my step goal with FitBit. There are tons of different savings rules you can set up and the best part is Qapital is free to use. Bonus, when you use my link you'll get $5 after your first savings.

Use Chime to Save For You

If you still struggle with setting aside money for savings, then I recommend using Chime to start saving an emergency fund for you. Chime works by starting a spending account (takes 5 minutes) and opting into the automatic savings plan. Every time you use the Chime Debit Card it rounds up your purchase to the nearest dollar and puts in in savings. Right now they also offer a 10% bonus on those savings. All those withdrawals add up over time. Chime is free to use, with no monthly fees. With Chime, you end up saving money without having to think about it.

Best Tool

Chime works by starting a spending account (takes 5 minutes) and opting into the automatic savings plan. (Learn more about getting started with Chime).  Every time I use the Chime Debit Card it rounds up my purchase to the nearest dollar and puts in in savings. Right now they also offer a double round-up bonus on those savings. All those withdrawals add up over time. Chime is free to use, with no monthly fees. With Chime, you end up saving money without having to think about it.

How a Buffer is Different

A buffer is for the unexpected expenses that pop up, the parking ticket, or the dry cleaning from having a drink spilled. While it is wise to keep your emergency fund in a separate but easily accessible account, your buffer stays in your regular checking account.

How Much Should You Have Saved as a Buffer

I like to have $100-$200 a month set aside as a buffer. Some months I use more of it than others, whatever is left at the end of the month rolls over into the next month's buffer.

That being said I also know folks that prefer to have a $1k buffer. It really depends on the number of expenses you have each month. I live alone and work from home, so I don't tend to incur too many unexpected expenses. But I know that the more people, the more things can pop up.

How to Save Up a Buffer

When setting up your budget, set up a Buffer line. Make sure you are contributing to it each month until you hit that sweet spot. Whatever you don't use a previous month can be rolled over into the next month. Chime or Qapital could again be  great ways to kick-start savings. Just make sure you're covered no matter what expenses pop up in life.

Wrapping it Up with a Bow on Top

You definitely need an emergency fund. However, having a buffer will help you stay on financial track without always dipping into your emergency fund. Not all unexpected expenses are emergencies.

To make sure you keep your emergency fund funded, it's best to keep your emergency fund and buffer separated. If you are in debt and can't imagine being able to save money, use a tool like Chime or Qapital, or make it a game, whatever is going to work best for you.


Liz is a blogger and podcaster helping people with personal finance and working for themselves. She shares her own journey to debt freedom and helps graduates dealing with above average student loan debt on her site, Less Debt More Wine. She currently resides in NC after calling Massachusetts home for nearly a decade.