Is $1k Baby Em Fund enough?

**livefreebrewfree** · 11-11-2010, 02:03 PM

My wife and I have the $1k emergency fund set aside for baby step 1. We never actually had an emergency fund before so it feels good. But now that I'm moving along, I look at it like it's not enough (odd since we never even had one before). Has anyone else had this feeling? We have deductibles for both our cars at $1k and the same for the homeowners policy (saved us a ton of cash by raising our deductibles).

**Greebo** · 11-11-2010, 02:11 PM

There are a lot of people who feel that $1k isn't enough. We shared that concern. We opted to put $300/pay into our EF while we were in BS2, so that we continued to build our EF as we were eliminating our consumer debt.

**LuLuBleen** · 11-11-2010, 02:51 PM

Is $1k Baby Em Fund enough?

One of these days, I'm going to stop reading the term "baby emergency fund" as if it means an emergency fund for babies.

Seriously, though, I can't think of any emergency I've had in the past ten years that cost "only" a thousand dollars out-the-door. Fortunately, we haven't had too many anyway.

Since you've got three one-thousand-dollar deductibles, a good next goal would be to increase that BEM to three thousand dollars. You know, just in case both cars crashed into your house.

Okay...unlikely, but it's never a bad idea to pad your savings, right?

**a.nonymous** · 11-11-2010, 05:16 PM

Well, to show the other side, we have had 4 emergencies since we started the plan (1 1/2 years ago), and none of them were over 1k, in fact, none of them were more than 650.
So, we just did fine with a BEF of 1k.
We should have baby step 2 finished by February/March then we'll load up on that emergency fund to grow it to adult size...

**StanleyJohnson** · 11-12-2010, 07:36 AM

$1,000 is a good start.
I'd try to grow your EF to $2,000 while paying down your debt.
That's what we did.

**khaski** · 11-12-2010, 06:59 PM

It simply depends on where you are in life- if you both drive 2 year old cars and rent a place (that you wouldn't be responsible for repairs on) and had low health insurance co-pays for hospital stays, etc, than your EF could be lower than people with 8 year old cars who own a home and have higher co-pays for health stuff. You simply must evaluate what you're comfortable with as you start the process...for us,. $1k isn't enough either, we've got more than that now but I'll stop sweating somewhere around the $4 mark!

**frugal is fun** · 11-12-2010, 11:02 PM

Originally Posted by LuLuBleen

One of these dahttp://www.frugalvillage.com/forums/newreply.php?do=newreply&p=1437536ys,

Since you've got three one-thousand-dollar deductibles, a good next goal would be to increase that BEM to three thousand dollars. You know, just in case both cars crashed into your house.

Okay...unlikely, but it's never a bad idea to pad your savings, right?

thanks for the giggle! But I agree totally!

**MissSeetonFan** · 11-16-2010, 11:58 AM

You need some sort of emergency fund and $1000 covers most of them as long as they happen one at a time. The point of the $1000 is to make it easy enough to get to and maintain while you are getting your budget in place. Any time you have to break into the fund, you are supposed to stop Baby Step 2 (snowball) and renew the $1000 emergency fund.

So while $1000 may not be "enough" in terms of any major emergencies, it is a cushion so that a major emergency won't send you straight into bankruptcy or tempt you into using a credit card you have been paying down.

I do like some of the other suggestions about increasing it gradually - kind of combining BS2 and BS3. It depends on how much you want to follow Dave Ramsey to the letter and whether you want to adjust for your situation.

Good luck
Clorinda

**mek42** · 11-19-2010, 11:01 PM

Originally Posted by MissSeetonFan

...

So while $1000 may not be "enough" in terms of any major emergencies, it is a cushion so that a major emergency won't send you straight into bankruptcy or tempt you into using a credit card you have been paying down.

...

I added the bold above. For me, the main purpose of the BEF is to help stop further use of the credit cards. The $1,000 amount is a big chunk of change for someone previously living paycheck to paycheck. Part of what we learned by having the BEF was that if we screwed up our budgeting, we had a fallback without using the cards we're working so hard to pay off. Going along with that, man, we worked hard to get that BEF up to $1,000, so is something really an emergency? (We once used the facilities at my rifle club across town for a weekend in order to not spend so much from the BEF due to a plumbing issue.)

Having the BEF also helps us to think about what we'll do if we have a greater than $1k emergency. Even if that happens, the $1k should buy us enough time to rationally decide how to overcome the obstacle instead of just automatically seeking a loan because that's what "everyone" does.

**frooz** · 11-20-2010, 07:59 PM

I think it also depends on how big your snowball is each month. If your baby em fund is only $1,000 but you're snowballing $2,000 a month then if murphy struck you you really have at least $3,000 to hit it with.

**Equest** · 12-17-2010, 01:27 PM

Let me start by saying that I really do appreciate the message that Dave sends to the folks who really need it. I know that his advice has definitely been instrumental in getting many Americans off the spending/debt carousel, and many families will be better off for it.

I shudder at his idea of only having a $1,000 emergency fund in the bank while paying off debt. That's scary to me - I keep much more in an emergency fund. I think this is especially concerning for the families with multiple kids, who is often the target Dave audience. As someone is paying off debt on the first baby step, what if they encounter a setback (car repair, medical bill, property repair) that costs over $1,000. I can think of many. That person would certainly end up charging the credit card further putting them in the hole.

I do think that Dave does serve a purpose for many but his advice is certainly not one size fits all.

**handerson2005** · 12-19-2010, 11:58 AM

Because of the area we live in, and the general high costs of most things, we decided that $1k wasn't enough. We have $2k in the bank for our BEF. Like a previous poster said, we have quite a bit that we snowball every month, so if we really needed, we could pause the snowball if our costs went over $2k for some reason.

That being said, we'll probably also do a 8 months to a year of EF instead of 3-6 months. We just like the idea of being comfortable with that cushion.

I think $1000 is a great starting point, but it really does come down to your situation and what makes you feel comfortable.

**larabelle** · 12-19-2010, 03:07 PM

The $1K was just fine with me ...but I agree with an earlier poster in that it depends on where you are in life. I am single, healthy with GREAT health insurance and I rent although I do drive an older car. If I had children or owned a home I am not sure that I would be content with $1K.

**Mamaof2rugrats** · 12-20-2010, 09:56 AM

We have a higher EF than that and it's not enough IMO. We have about 5K currently. There have been plenty of times where I couldn't dream of having 1k in an emergency fund. We would have more but we've had alot of consumer debt to pay off due to prior marriages/divorces/court debt.