I’ve spent most of my life wearing the uniform on Active duty, in the National Guard and the Army Reserve. Of the many things I’ve learned is you always have a back up plan. Tactically, we call it a fallback position. Strategically, we call it a contingency plan. Whatever you call it, it is designed to give you options.
When it comes to personal budgeting and financial planning, your emergency fund is an essential part of your plan, your fallback position. It gives you options, but it requires early planning.
Financial readiness is important for all of us. In my experience, for military personnel, veterans, and their families, it can be vital. Life’s uncertainties—whether they stem from deployments, relocations, transitioning out of the military, changing careers or unexpected expenses—underscore the importance of having an emergency fund.
Why an Emergency Fund Matters
An emergency fund is a financial safety net designed to cover unplanned expenses without resorting to debt. For military families, these expenses can range from urgent home repairs to unexpected medical bills or relocation costs during PCS (Permanent Change of Station). According to the Military Family Advisory Network, nearly half of veteran families have less than $500 in emergency savings or no fund at all—a sobering statistic that highlights the vulnerability many face during financial uncertainties.
Without an emergency fund, families risk falling into debt or compromising their long-term financial goals. This is particularly critical for service members who can experience disruptions in their pay and entitlements and are often asked to travel or relocate unexpectedly.
How Much Should You Save?
I have heard it said that you should have enough to cover two to six months of essential living expenses. For military families with a stable budget and good credit, two months may suffice; however, those with more complex financial situations should aim for six months. Starting small, with a goal of just $500 – $1000, can provide significant peace of mind knowing you are more prepared for financial uncertainties.
Strategies for Building an Emergency Fund
Building an emergency fund may seem daunting, especially for those living paycheck-to-paycheck. Here are practical steps:
- Automate savings: With the many finance apps and mobile banking options available today, this is easier to do than ever. Setting aside even just a few bucks per week can add up to $50 or $100 a month.
- Commit to a plan: Can you afford putting just a few dollars aside each week? Or something more? Set it up and watch it grow. Have milestones to keep you motivated. Perhaps even set up rewards along the way once you hit another milestone.
- Pay yourself first: Mortgage or rent payments, required debt payments, insurance, and other bills all seem to tug at your resources first. It is true these are essential payments. But when you also view your emergency savings as an essential payment, when you prioritize it, two things will happen: 1) you will enjoy the reward of building something that is valuable to you and your family and, 2) you will begin the habit of saving (which will contribute to your future financial well-being).
- Put it just out of reach: Ensure you can get to it quickly, but don’t make it so it’s too easy to access. I have my emergency fund, a high-yield savings account, set up at an alternate bank from the one I do most of my banking. I can get to the money quickly, if needed, but it is not viewed within my routine income and expense transactions.
Final Thoughts
An emergency fund, your fallback plan, provides you options enabling you to navigate life’s challenges with resilience and confidence. For military families and veterans, this preparedness is a tactic you can employ today to increase your readiness.
Financial Readiness Resources for Military and Veterans
The Department of Defense Financial Readiness: https://finred.usalearning.gov
Veteran Saves, a campaign of the Consumer Federation of America: https://veteransaves.org
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