Why Emergency Funds Matter

Kofi Gyebi
Founder 400LB Elephant

Based on a true story

Being open and transparent is very important to try to connect with as many people as possible who are in different seasons of their journey is a personal goal of mine. This is my journey on why emergency funds are so important. I was less than a year into being debt-free when I started dealing with anxiety. I thought of myself as a relatively healthy person. Diet, mindfulness, and spirituality are critical to my well being. Good health has been my thing. Then 2018 life started throwing me curveballs in the form of panic attacks. They got so bad I had to take a month off of work to understand what was going on.

Short- and long-term disability insurance programs replace some of the wages lost by people who cannot work because of a disabling injury or illness that is not work-related. Short-term disability insurance typically covers periods lasting less than 6 months, and long-term disability insurance lasts for the length of the disability or until retirement.

Bureau of Labor Statistics

A colleague advised me that I could file for short term disability, which would pay me while I was out. The insurance company declined my claim; I was astounded at their decision. It took six months to get reimbursed. 

Just over 1 in 4 of today’s 20 year-olds will become disabled before they retire.
Accidents are NOT usually the culprit. Back injuries, cancer, heart disease and other illnesses cause the majority of long-term absences.
Are you prepared if it happens to you? Probably not. If you’re like most Americans, you don’t have disability insurance. Or enough emergency savings to last 34.6 months. Yes, that’s the duration of the average long-term disability claim.

Council for Disability Awareness

Tapping into my Emergency Funds

Several weeks into my leave I received my last paycheck and my rent, car insurance, cell phone, and cable were all due. The sad part is when you’re going through a health scare and stop working; your bills don’t stop. Debtors don’t terminate balances, they add interest! With all of the doctor’s appointments (deductibles) and fighting with Aetna, I had enough money to cover my bills. I went to the bank and withdrew my bi-weekly pay amount from my emergency savings account. They hadn’t seen me in years outside of when I set the account up. I wish I had set it up with a company with a higher savings rate. It gave so much peace of mind knowing that money was there, and readily accessible. There was no guilt, pain, or pushback. I built this fund for an occurrence of the like. Can you imagine what life would’ve been like without that cushion? Understandably people fall on hard times. Build an emergency fund, make it your top priority if you don’t have one. Everyone’s crisis may be different; some fall under car issues, medical bills, or job layoffs. Others have aging parents; my mom had a slip and fell back in December. I was on a plane the next day to see her and rented a car and covered medical expenses.

Credit cards and emergency funds

In conclusion, life comes at you fast, this isn’t a scare tactic. This is my story a plea be proactive, but I’ll give you some statistics for those of you who would like the scope of each generation’s activity around emergency funds. According to Bankrate, “35% of millennials have more credit card debt than savings”. People are prone to finance emergencies on their credit card, adding to the debt ceiling. “41% of baby boomers and 45% of Generation X are more focused on emergency savings than paying off debt”. Point being, secure your peace of mind with an emergency saving of at least $1K and make it easily accessible. Also, practice self-control not to spend or touch it; you never know when you may need it. 

This Post Has 8 Comments

  1. Thank you, I have just been looking for info about this topic for a long time and yours is the greatest
    I have discovered so far. But, what concerning the bottom line?
    Are you certain concerning the supply?

  2. Roxanne

    That statistic about 1 out of 4 20 year olds freaks me out! Thanks for sharing, I didn’t know that.
    I will be reviewing my insurance coverages to see what they say about disability.

    1. 400Lb Elephant

      It’d be best to review your insurance through work and personal coverages. Too often we forget about the importance of having our own coverage just in case we leave an organization.

      1. Kofi Gyebi

        Couldn’t agree more Roxanne! Thanks for the note and we’ll make sure to share that in a future post!

    2. Kofi Gyebi

      Yes, short term disability is crucial and is one of the most utilized insurance plans!

  3. Harley

    Having read this I thought it was very informative. I appreciate you finding the time and effort to put this article together.
    I once again find myself spending a lot of time both reading and commenting.

    But so what, it was still worth it!

    1. Kofi Gyebi

      Glad you found this to be useful! I put it together so hopefully people can find value in it and share to inform others the value of saving.

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