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INTRODUCTION
When you are in a relationship or married, building an emergency fund together is one of the best ways to strengthen your financial foundation. An emergency fund provides peace of mind and helps you navigate unexpected expenses without derailing your finances. Having an emergency fund as a couple is one of the first steps to establishing a stable financial house, paying off debt, and achieving your financial goals.
Even though establishing an emergency fund is essential for a couple, many people find talking about money difficult. My husband and I had several money dates dedicated to discussing our emergency fund, but it was a process. Having a framework for discussing your emergency funds with your partner is helpful, especially with new transitions with planning a wedding or having a baby. Here’s a helpful step-by-step guide for starting this crucial conversation.
1. PLAN OUT YOUR FINANCIAL GOALS TOGETHER AS A COUPLE
An emergency fund is like a “money moat” that protects you and your other financial goals when the unexpected occurs, like car repairs, sick kids, or medical emergencies. Whether saving for a home, paying off debt, or building wealth, an emergency fund supports these goals. Having an emergency fund can prevent you from relying on credit cards and building up expensive debts. Define your priorities and emphasize how an emergency fund can help you. Dedicating a day, like an annual financial review, to just dreaming about your life together and how to use your emergency fund to support you can help.
2. AGREE ON A MINIMUM AMOUNT FOR YOUR EMERGENCY FUND
Determine how much you’d like to save for your emergency fund. In Dave Ramsey’s “Total Money Makeover,” he recommends starting with a $1000 emergency fund. Why? Because it is a reasonable sum to take care of several types of emergencies, such as dental repairs or a new engine for your car. And, it is an achievable goal within a year. If you saved $100 monthly in a high-yield saving account, you would have $1200 in a year. If you had a side hustle or sold some stuff on Amazon, you could reach $1000 much faster.
After you save $1000, you can move towards saving three to six months of essential expenses. For instance, if your monthly expenses are $3,000, aim for at least $9,000 to $18,000. This may seem astronomical, but if you save each month consistently, you'll be able to save up for a 6 month emergency fund. With a 3-6 month emergency fund, you would be able to pay your rent, food, and transportation for 3-6 months if you were out of work.
3. TRACK YOUR SPENDING
Track your spending to see how much you need in your emergency fund. Identify your essential expenses like rent, groceries, and utilities. Apps like Simplifi or YNAB can make knowing your expenses easier by automatically categorizing your spending. Some apps, like Monarch Money, can show your expenses as a couple all on one dashboard. Use this information to calculate how much you’d need to cover these costs during an emergency.
4. DEVELOP A SAVINGS PLAN
Once you know your target amount, create a savings plan. Discuss how much you can contribute monthly and set a timeline for reaching your goal. Automating your savings can make this process seamless and simplifies your finances. For example, set up a recurring transfer of $200 every payday to your emergency fund account. Over a year, you'd have $2400 saved up just with automatic $200 monthly payments.
Try saving at least 10% of your income for an emergency fund as a starting point. If you can’t get to 10% now, start with 1%. If you make $3000 per month, you likely aren’t going to miss $30 a month. Then, to get to 10%, increase your savings every 1-3 months by 1%. If you increase your savings by 1% each month and adjust your budget, then by 10 months, you’ll hit 10%. Even better, you can automate your savings so it happens every month without thinking about it. Small, consistent changes can make a huge difference over time.
5. MAKE A BUDGET THAT PRIORITIZES SAVING
Discuss how much you need to save each month for your emergency fund with your partner. A budget helps you prioritize how you use your money, so make a budget that works for you and your savings goals. Treat your emergency fund contributions like a non-negotiable bill. For example, if you decide to save 10% each month, you send that money as your first “bill” in your budget, and then you budget the rest of the 90%. Your budget may change over time once you marry, so create a system that works for both of you.
One type of budget that helps you prioritize savings is called the reverse budget. With the reveres budget, you prioritize savings before allocating money for expenses. The reverse budget helped me build wealth while planning my wedding because it helped me prioritize saving.
6. HAVE MONEY DATES
Set aside regular times to discuss your finances. These “money dates” are an opportunity to review your progress, adjust your plan if needed, and celebrate milestones. Having weekly money dates makes talking about money easier. Make money dates enjoyable, like pairing the meeting with a nice dinner or during a walk. Want to learn more about managing money as a couple? Check out these 3 books or audiobooks on Audible:
- Total Money Makeover by Dave Ramsey
- Smart Couples Finish Rich by David Bach
- Money for Couples By Ramit Sethi
7. DECIDE HOW MUCH TO CONTRIBUTE TO YOUR EMERGENCY FUND
Discussing money with your partner must include how your will set up your money accounts. Whether you have completely separate accounts, only use one joint account, or have a mix of separate and joint accounts, your emergency fund must be used for the family if there is an emergency. A joint emergency fund helps with this so that both partners have access and can contribute to the account.
If your incomes differ, consider proportional contributions based on your earnings. This approach ensures fairness and prevents resentment. For example, if one partner, Nick, earns $4,000 monthly and the other, Natalie, earns $2,000, they can contribute 10% based on their income. So, Nick would contribute $400, and Natalie would contribute $200. Even though Nick contributes more, it is fairer than asking Natalie to contribute $400, which is 20% of her income. Alternatively, you can split the contribution evenly, like Nick and Natalie each put $100/mo in the emergency fund.
8. DECIDE WHERE TO PUT YOUR EMERGENCY FUND
Choose a dedicated account for your emergency fund. A joint high-yield savings account is ideal as it offers better interest rates and keeps your savings easily accessible for true emergencies. A joint account ensures both partners can access the account and agree on its purpose to avoid confusion. Research options from banks like Wealthfront, Ally, or Capital One that offer competitive rates. We used Wealthfront for our joint emergency account and love it. Evaluate these options together and find an account that works for you and your partner.
9. TRACK YOUR PROGRESS
Use a visual tracker, budgeting notebook, or budgeting app like Simplifi to see how close you are to your goal. Sharing these victories can boost motivation for both partners. For example, create a thermometer chart on your fridge and color it as you save. Seeing your progress can be incredibly motivating.
10. HAVE A MONEY DATE BEFORE USING THE EMERGENCY FUND
Agree to have a money date before using the emergency fund. Define what constitutes an “emergency” and establish guidelines for withdrawals. For example, an emergency might include unexpected medical bills or urgent home repairs but not a vacation or a wedding. Clear rules can prevent disagreements and ensure the fund functions as intended: a money moat for your family that takes care of the unexpected. Also, celebrate the small wins by tracking your savings progress and how your emergency fund helps you and your family.
CONCLUSION
You can create an emergency fund with your partner that helps you both improve your finances and your relationship. Talking about an emergency fund with your partner doesn’t have to be daunting. Approaching the conversation with these actionable steps will build trust and build a great financial foundation for your household. Start today and enjoy the peace of mind that comes with knowing you’re financially prepared for whatever life throws your way!
IN SUMMARY
How to Create An Emergency Fund With Your Partner
- Plan out your financial goals together as a couple.
- Agree on a minimum amount for your emergency fund.
- Track your spending.
- Develop a savings plan.
- Make a budget that includes saving.
- Have regular money dates.
- Decide how much to contribute to your emergency fund.
- Decide where to put your emergency fund.
- Track your progress.
- Have money dates before using the emergency fund.
Are you ready to start an emergency fund with your partner?
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