Emergency funds are a widely discussed and important part of personal finance. They’re intended to help you keep from going into debt when something comes up and you simply have to pay for it (car accident, for instance). Larger ones are meant to support you if you lose a job.
If you have the chance, there’s another handy kind of fund…to hand the times when an emergency fund shouldn’t be used. You see, an emergency fund shouldn’t be used for things like unplanned trips (non-emergency ones) or gifts or dinners out. Yet sometimes these things come up and it’s not a bad idea to be prepared.
For example, my sister-in-law recently asked whether we could help pitch in to buy my mother-in-law something really nice for Mothers’ Day.
My first thoughts came at the same time: a) That sounds like a really good idea because my MIL is an awesome woman and has sacrificed a lot for her kids, her patients, and other people in general. She hasn’t had the money to get something useful like this for herself. and b) oh crap, where’s the money coming from?
So I decided to start looking through finances to see where the money would come from. I considered using part of our leftover stimulus, since we’d found a great deal on the computer. As it turned out, we got an unexpected payment from a writing project Micah and I did last year. We’d done it gratis as a way to get a publishing history. But they decided to send us a token sum anyway. Voila!
That got me thinking, though, wouldn’t it be handy if we kept something like $200 reserved for this sort of thing? It doesn’t come up much, but a small flex-fund would put my mind at ease.
What about you, do you have some kind of flex fund? Is there enough room in your budget? Or do situations like this get you worried too?
Other flex-fund posts:
- plonkee mentioned them last week when discussing general freedom and finances.
- Centsibility, the book I reviewed on 4/27 suggested that tweens and young teens have a similar fund instead of a full-blown emergency fund.