Your financial getaway car: 5 reasons that every woman needs an emergency fund 

Last week, we celebrated International Women’s Day and it got me thinking about how finance can be a feminist tool. Through financial education, women can learn to invest, save, and manage money effectively. Whether you choose to live your life as a tradwife or a single career girl climbing the ladder, it should always come down to just that – your choice.  

The greater your financial security, the greater your power of choice. And when you’re building financial security, there’s one fundamental element that should be standing by, engine rumbling quietly, ready to transport you to financial safety.  

Every woman needs an emergency fund.  

Your emergency fund is your financial getaway car, waiting in the wings so you can make a quick escape from financial crises. For Fearless Girls navigating an ever-increasing cost-of-living and a changing labour market, an emergency fund is not just a suggestion; it’s a necessity.  

Trigger warning: This article delves into the sensitive topic of financial abuse, which can be distressing for those who have experienced it. We discuss tactics used to control and manipulate finances, aiming to raise awareness and offer support. Reader discretion is advised for those who may find this content triggering. 

 What is an emergency fund?  

An emergency fund is a designated pool of money set aside to cover unexpected expenses or financial emergencies. These can range from medical emergencies and car repairs to redundancy. Essentially, it serves as a safety net to protect you from falling into debt or financial hardship when life throws a curveball your way. It’s generally recommended to aim for between 3-6 months’ worth of bare-minimum expenses. In fact, financial experts recommend that women should aim for a larger emergency fund than men – as large as 8-12 months of expenses.

When you calculate your emergency fund, you should include bare-bones costs like rent or mortgage repayments, groceries and any debt repayments you might have (click here to find our 3 foolproof methods for clearing debt). Then look at your unique situation – do you have a family member relying on you, or specific medical conditions that you need to pay for? Factor that into your emergency fund too. Remember, this fund exists to support you when you most need it.  

5 Reasons Every Woman Needs an Emergency Fund 

Women often face unique financial challenges, from the gender pay gap to career interruptions due to caregiving responsibilities. In these circumstances, an emergency fund offers a sense of security and empowerment. It allows us to navigate financial setbacks without relying on external assistance, loans or credit cards. It safeguards our financial independence and well-being so that you can wave goodbye to that emergency in your rear view mirror. 

 

Here are 5 reasons every woman needs an emergency fund.

Women generally have longer lifespans  

According to the World Health Organisation, women tend to live 6-8 years longer than men worldwide. As our retirement period may be longer than the standard 30 years, we need a larger emergency fund to sustain ourselves financially.  

The gender pay gap is still screwing us over 

The gender pay gap exists. Women earn, on average, 16% less than men, with the average woman losing over $400,000 over the course of a 40 year career. This actually widens as you move into roles requiring higher levels of education, with the greatest disparity between PhD holders. This gap not only undermines economic fairness but also perpetuates broader societal disparities. Having an emergency fund can bridge that gap where needed.  

Women are more likely to take career breaks  

Whether extending maternity leave or to become a full-time caregiver, women are more likely to step away from full time careers and miss out on their peak earning years. In these cases, having an emergency fund may be what you need to tide you over during periods of unpredictable income.  

An emergency fund or a f*** off fund? 

This concept was popularised by the financial writer Paulette Perhach, whose early twenties were characterised by the fact she couldn’t say f*** off to things that weren’t serving her – for example, her creep of a boss or the rental apartment she couldn’t afford to move out of despite breaking up with her boyfriend. An emergency fund allows you to say f*** off and change your situation when you need to – be it walking away from corporate hell or moving out of your apartment for some breathing space.  

An emergency fund is your getaway car in a controlling relationship 

Forbes Magazine recently reported that financial control in relationships is now categorised as a form of domestic abuse. It’s a tactic used by abusers to reduce access to assets such as bank accounts or credit cards, and it can prevent victims from leaving their abusers simply because they don’t have the means to do so.  

Realising that you’re in this situation can be extremely traumatic. Creating an emergency financial safety plan or emergency fund not only acts as your getaway car if you should ever find yourself in a coercive or abusive relationship, but it safeguards you from this kind of control.  

How to build your emergency fund 

1. Define an emergency 

   • Not being able to afford a holiday or upgrade your car is not an emergency. With that said, everyone’s circumstances are different. Define any situation under which you are allowed to access that money and other than that, leave it alone.  

2. Set your goal 

   • As noted, the general recommendation is to have about 3-6 months worth of expenses. However, some financial experts recommend that women keep between 8-12 months worth of expenses in their emergency fund for the reasons outlined above.  

3. Make it accessible 

   • When it comes to storing your emergency fund, accessibility and safety are the key considerations. Keeping it in cash may be accessible but it offers no potential for growth, while ETFs may be too risky and inaccessible for this kind of fund. A high yield savings account in a separate bank from your salary account is considered the most secure way to ensure growth and easy access (without being too accessible!) 

Don’t allow your emergency fund to fall into the bracket of things you mean to do, but never quite get around to. Prioritising and maintaining your emergency fund gives you financial independence and peace of mind, even under the most traumatic circumstances.

If you take one piece of advice from this blog, and one piece only, let it be this – an emergency fund is not just a buffer; it’s a lifeline. 

 Have you started building your emergency fund? Let us know in the comments or tag us on @fearlessgirlfinance_