Why You Need an Emergency Fund While in DebtThis is a post created for Debt Roundup by Erin of Everything Finance Blog.

Are you so focused on paying off your debt that you’ve chucked savings out the window?

What if something were to happen to you? Is debt such an important emergency that you’re willing to risk leaving yourself vulnerable to even more debt?

This can be a sensitive topic in the personal finance world, but I do believe that everyone needs something saved up depending on their situation, even if it’s just $100.

When you’re in debt, you’re already running at a deficit – an unexpected expense can throw a wrench in your plans if you’re not careful.

That’s why I’m going to review 3 reasons why you need an emergency fund, even when in debt.

Is debt such an important emergency that you’re willing to leave yourself vulnerable to more debt? Click To Tweet

An Emergency Fund Can Break the Cycle of Debt

If you have consumer debt, then you might be familiar with the vicious cycle of debt that never seems to end. The interest you’re paying can become unbearable, and your minimum payments alone might be forcing you to cut back on spending.

The last thing you need to worry about is being able to afford an unexpected expense. However, if your bank account is hovering around $0 and you have just enough to get by, you’re going to run into a lot of trouble if something happens.

Owning a home or a car, having pets, or having children means a number of things can go wrong at any point. That can be a little overwhelming to think about when considering the amount of debt you have. Do you really want to add to it?

If you can set aside anything extra at all to build up an emergency fund, you should. I’m not recommending that you stop paying your debt in favor of saving – not at all! – but if you can spare $5/week, any amount will help. That’s the amount you won’t have to pay interest on should something happen.

Would you rather continue paying your debt, have your car break down, be hit with a $500 bill, and have to use your credit card? Or would you rather save a little bit every month, have that $500 in your savings account, and handle the expense without worry?

[infobox title=’Start Saving Now!’]Open a free savings account with Capital One 360. It’s easy to do and they have no fees![/infobox]

An Emergency Fund Can Give You Peace of Mind

Experiencing anxiety around your financial situation is normal when you’re in debt. After all, it’s not fun to feel like you’re powerless or helpless when it comes to your money.

The reality is, you’re not powerless or helpless. You can help yourself by establishing an emergency fund. Once it’s in place, you’ll have the benefit of knowing you have a plan in case something happens.

Having that bit of savings stashed away will help you sleep better at night and give you the confidence you need to take back control of your finances.

If you’re already under a lot of stress with your bills, do yourself a favor and find a way to save. You’ll feel relieved once you realize you don’t have to worry about anticipating expenses.

An Emergency Fund Helps Create the Habit of Saving

Many people get into consumer debt for one simple reason – they spent more than they earned. For that reason, saving money might be a bit foreign to you, because you’re used to spending it.

Hopefully you’ve been taking Grayson’s great advice here on the blog and have been chipping away at your debt, and not getting into more of it. Along the way, you might have learned that paying off debt takes discipline.

Saving takes some, too, and it can be difficult to find the motivation because there’s no “end game” like there is with paying off debt. Of course you want to be debt free, but with saving, what are you working toward?

Well, saving will help you stay debt free, because you’ll have the cash reserves to handle any expenses that come up. Saving money will also compliment the discipline you’ve been developing to spend less.

While saving $5/week might sound silly to you, it’s not, because you’re getting into the habit of saving, and that’s what’s important. Financial success is largely based on the money habits you have. When saving becomes normal, you’re more likely to succeed.

Related: Save what you can with Digit!

Start Saving!

If you’re tired of stressing out about not having enough money to cover you in case an emergency happens, then start thinking about how you can save money. If you’re paying extra on your debt, is there any way to divert some funds to savings? Can you get a side gig or second job where your entire pay goes directly into a savings account?

By the way, you can save while paying off debt. Here’s how!

Creating an emergency fund may be rudimentary, but too many people don’t bother saving because they’re only focused on their immediate goal of paying off debt. Think about your future and your financial well-being. When your debt is paid off, but you have no savings to your name, how are you going to feel? You’re better off getting into the habit of saving now so that you can continue to build wealth after your debt is gone.


Erin M. is a staff writer at EverythingFinanceBlog.com, a blog dedicated to every topic related to personal finance. We talk about investing, saving, budgeting, paying off debt, and more. Follow us on Twitter, Facebook, and Pinterest.

Do You Know How Much You Pay?

Do you know how many subscription services you have each month and how much money you are paying? Well, if you don’t, then it’s time to take a look at Trim. It’s a service to help you cancel unwanted subscription services with ease. The best part is it’s free!

Check Out Trim

Leave a Reply

Your email address will not be published. Required fields are marked *


    1. They definitely shouldn’t be taken for granted! I’ve been very thankful for my emergency fund these past few years.

  1. I agree that having an emergency fund does give you a peace of mind. One of the worst feelings that I don’t miss is worrying about how I am going to have to take care of an emergency when I had no money. So glad those days are behind me.

    1. I’m happy for you too, Petrish! It’s great to know you can handle whatever expenses come your way.

  2. I disagree. I would rather put $500 down to reduce my Credit Card debt then put into a Savings Account and make no interest. But if your debt has a low interest rate then yes you should start your Emergency Fund.

    1. The point of an emergency fund it not to maximize your interest savings. It’s also not to help your grow your wealth. The fund is to ensure you have money to pay for something unexpected, like a new water heater. If you use don’t have the $500 when a water heater breaks, then you have to fund the entire purchase back on your card. You then have to pay interest on this. If you have the $500, then you can reduce the overall price by $500, which reduces your need to use your credit card to fund emergencies.

      Most people who don’t save anything will face some type of emergency. If they have zero in savings, then they have to rely on their borrowing to help them get through it. This then puts them deeper in debt. The emergency fund is just like insurance. We pay for it for the “what ifs”, not because we expect bad things to happen for us.

    2. I think Grayson’s reply sums up my thoughts pretty well. I understand wanting to pay off debt and the argument that debt is an emergency, but I’ve seen first hand how dangerous it is to have absolutely nothing in savings.

      My parents lived paycheck-to-paycheck and struggled with debt – as a result, they often had nothing saved up, and when emergencies happened (which they often did), they were left with no choice but to charge it and continue to try and pay off an even larger amount. They were in a constant state of worry of anything breaking or needing to be repaired. It’s a personal decision, but I would rather know I can handle extra expenses than have to worry about adding to my debt.

  3. I agree with all the points mentioned! Having an emergency fund is very important. We always make it a point to save more in ours because we want to be prepared for unexpected but urgent necessities that we don’t want or have to charge.

  4. These are the exact reasons why I decided to contribute toward my EF every month even though I could be using that money for paying off debt instead.

    1. They are pretty good reasons! In my case, not having any money would stress me out much more than having debt, which is why I prioritized saving.