Here’s a horrifying fact. 46% of Americans can’t come up with $400 to pay for an emergency. Instead of an emergency fund, those people have to use credit cards, borrow from friends and family, or just… not pay for the emergency.
Scary, right? That means almost half of my countrymen are one fender bender, one slip on the ice, one infant with pneumonia away from—at best—massive debt. And at worst, massive bankruptcy. Homelessness. Abject poverty and desperation.
Think I’m being dramatic? I’m not.
My purpose in bringing up the nightmare that is living just above the poverty line is not to nag those who can’t afford an emergency. What kind of monster would belittle people so poor they have no way of saving themselves from one minor stumble on the road to making ends meet?
I’m also not here to advocate filing for bankruptcy multiple times (let’s say six) as a legitimate means of making emergencies go away.
Instead, we’re here to plumb the depths of one of personal finance’s most enigmatic puzzles:
How much money should you have in your emergency fund?