If We Had an Emergency Fund: Why Every Family Needs Money for the Unexpected

We often think about money in terms of what we want to do with it.

We save for a house.

We invest for the future.

We plan for retirement.

We try to increase our income.

But there is another purpose for money that is easy to overlook:

Money can protect us when life suddenly goes wrong.

I learned this through painful experiences in my own family.

Not from a financial book.

Not from a personal-finance course.

From real emergencies.

October 29, 2007: When We Needed Money Before Payday

It was October 29, 2007.

Someone informed us that my father was lying in front of the Public Health Centre at Borholla, our hometown in Assam.

We brought him home.

He could not stand on his own. We laid him on a bed. He was restless, and his legs had to be moved up and down again and again. His bowel and bladder functions had also stopped.

My father was seriously ill and unable to move properly.

We knew he needed medical attention.

But there was a problem that had nothing to do with medicine.

We were waiting for money.

My father’s pension was due to be deposited on November 1.

We had to wait.

On November 1, his pension was deposited. Once the money became available, we were able to take him to Jorhat Civil Hospital.

By then, valuable time had already passed.

I will never know whether reaching the hospital earlier would have changed the outcome. Nobody can know that now. He was later referred to Assam Medical College and Hospital in Dibrugarh, but the doctors could not determine exactly what disease had caused his condition.

Unfortunately, his illness did not end there.

My father remained bedridden for nearly ten years.

He could not even hold a spoon or a glass by himself. He could not eat or drink without someone helping him. Almost everything had to be done by me, my mother, or another family member.

A person who had once lived his own life became completely dependent on others for his most basic needs.

For nearly ten years, caring for him became part of our everyday life.

He remained bedridden until his death on December 22, 2016.

I cannot say that having an emergency fund would have changed my father’s medical outcome. Nobody can know that.

But I do know one thing:

If my father had kept some money aside for an emergency, we would not have had to wait for his pension before taking him to the hospital.

That is what stayed with me.

Looking back, I also realise that an emergency can have consequences that go far beyond the first hospital bill.

It can affect your income.

It can reduce your savings.

It can create new expenses.

It can require someone in the family to stop working or spend a large amount of time providing care.

It can affect you mentally and physically.

And sometimes, an emergency does not last for days or months.

It can change your family’s life for years.

That experience stayed with me.

June 2021: Another Emergency

Years later, in June 2021, another emergency struck our family.

My sister developed breathing problems.

It was during the COVID-19 pandemic. Even inter-district movement was restricted. Finding transportation itself was difficult. We eventually had to call an ambulance that was being used to transport COVID patients.

She was admitted to Jorhat Civil Hospital.

After about ten days, there was still no improvement. The doctors referred her to Apollo Hospital in Guwahati.

But admission required ₹50,000.

We did not have that amount readily available.

I borrowed ₹30,000 from a local moneylender, while my brother arranged the remaining ₹20,000.

Only then could she be admitted.

She was subsequently diagnosed with a severe lung infection and needed a major and risky operation.

The total hospital bill eventually came to nearly ₹9 lakh.

We had also never seriously thought about the need for medical insurance.

At that time, we were focused on managing life as it came. We had not prepared for the possibility that a medical emergency could cost several lakhs of rupees.

I had to take a personal loan from a bank.

Again, I found myself thinking:

What if we had been better prepared?

Perhaps an emergency fund would not have paid the entire ₹9 lakh hospital bill.

And health insurance, if we had had it, might not have covered every expense either.

But having money immediately available could have given us something extremely valuable at the beginning of the crisis:

time and choices.

We would not have had to scramble to arrange the first ₹50,000.

We would not have had to immediately turn to a local moneylender.

And when a family is frightened and under pressure, having even a modest amount of readily available money can make a tremendous difference.

The experience also taught me another important lesson:

An emergency fund and health insurance serve different purposes.

An emergency fund gives you money that is immediately available when something goes wrong.

Health insurance can help protect your long-term finances when medical expenses become very large.

You should not think of one as a replacement for the other.

An Emergency Doesn’t Wait for Your Salary

This is perhaps the simplest reason to build an emergency fund.

Your salary has a schedule.

Your pension has a schedule.

Your investments have their own process.

An emergency has no schedule.

A medical emergency can happen on the 5th of the month.

Your car can break down just before your salary arrives.

You can lose your job when you least expect it.

A storm can damage your house.

A family member may suddenly need to travel.

Your income can stop while your expenses continue.

That is why an emergency fund is not simply another savings goal.

It is financial protection against uncertainty.

What Can an Emergency Fund Be Used For?

An emergency fund is meant for genuine, unexpected and necessary expenses.

It is not money for a new phone, a holiday, a restaurant meal or an impulse purchase.

It is money kept aside for situations you cannot reasonably predict.

1. Medical emergencies

This is perhaps the most obvious reason.

An emergency fund can help with:

• Emergency hospital admission
• Medicines and diagnostic tests
• Emergency surgery
• Medical travel
• Expenses not covered by insurance
• Immediate treatment before other financial arrangements can be made

Health insurance is extremely important, but insurance does not always mean that you will have zero out-of-pocket expenses.

Having your own emergency cash can provide an additional layer of protection.

2. Loss of income or job

An emergency fund becomes even more important when your regular income suddenly disappears.

You may still have to pay:

• Rent or home expenses
• Food
• Electricity and other bills
• Loan EMIs
• School or family expenses
• Essential transportation costs

An emergency fund can give you some time to look for another source of income without immediately resorting to expensive borrowing.

3. Major home damage or urgent repairs

A roof can leak.

A water pipe can burst.

Electrical problems can occur.

A major appliance can suddenly stop working.

An accident, such as a fire, can damage your house.

Natural events such as earthquakes, floods, or storms can also cause unexpected damage.

Some repairs simply cannot be postponed.

An emergency fund can help you deal with a sudden repair bill without immediately turning to high-interest borrowing.

4. Major vehicle breakdown

For many families, a vehicle is not simply a luxury.

It may be necessary for work, medical care or everyday life.

An unexpected engine problem, accident repair or major mechanical failure can create a large bill.

An emergency fund can help you deal with the problem without disrupting your entire financial plan.

5. Emergency travel

Sometimes you have to travel unexpectedly because a parent, sibling or another close family member becomes seriously ill.

The cost of transportation, accommodation and food can add up quickly.

An emergency fund gives you the ability to respond when you need to travel immediately.

6. Serious family emergencies

A family emergency may involve expenses that you could never have predicted.

You may need to help a parent, child, spouse, sibling or another close family member.

You may not be able to predict the exact amount.

But you can prepare for the possibility that something unexpected will require money quickly.

An Emergency Fund Is Not an Investment

This distinction is important.

The purpose of an emergency fund is not to generate the highest possible return.

Its primary purposes are:

Safety.

Accessibility.

Availability when you need it.

If your emergency money is invested in something whose value can fall sharply when you need the money, you may be forced to sell at the wrong time.

Imagine needing ₹50,000 during a market downturn and having to sell an investment that has temporarily fallen in value.

You may technically have the money, but you may have to accept a loss at exactly the wrong moment.

That is why emergency money should be kept separately from money intended for long-term wealth creation.

Think of it this way:

Investments are for building your future. An emergency fund is for protecting your present.

How Much Should You Keep?

There is no single number that works for every family.

Someone with a stable government pension may need a different emergency reserve from someone whose income depends entirely on a private-sector job or business.

A reasonable goal for many households is to gradually build an emergency fund covering 3–6 months of essential living expenses.

But don’t let that number discourage you.

If you currently have nothing saved, don’t think:

“I need six months of expenses, so I cannot start.”

Start with the first target.

Then build it gradually.

For example:

₹10,000 → ₹25,000 → ₹50,000 → ₹1 lakh → several months of essential expenses

The exact numbers depend on your situation.

Your income, job stability, dependants, existing insurance, debt and monthly essential expenses all matter.

The important thing is to begin.

Don’t Wait Until You Can Save a Lot

My family’s experiences taught me something very simple.

An emergency fund does not have to be created in one day.

It can be built ₹500, ₹1,000 or ₹2,000 at a time.

What matters is creating a separate pool of money that you don’t touch for ordinary spending.

Because the first emergency may not cost ₹9 lakh.

It may cost ₹5,000.

Or ₹20,000.

Or ₹50,000.

And having that money available can prevent a relatively manageable problem from becoming a financial crisis.

You do not need to wait until you are earning a large income.

You need to start building the habit of keeping some money aside for the unexpected.

The Real Value of an Emergency Fund

The value of an emergency fund is not only measured by the amount of money sitting in the account.

Its real value is what that money allows you to do.

It allows you to say:

“I don’t have to wait until payday.”

“I don’t have to immediately borrow from a moneylender.”

“I don’t have to sell my long-term investments at the wrong time.”

“I have some time to think.”

And that last one may be the most important.

When something terrible happens, you don’t want your financial situation to force you into desperate decisions.

You want enough financial breathing room to make a better decision.

But having financial breathing room is only part of making good financial decisions. You also need a clear way to think through major money choices. Learn how to think clearly before making any big financial decision.

An emergency fund may not make the emergency disappear.

It may not pay the entire bill.

It may not solve every problem.

But it can give you something that becomes extremely valuable when you are under pressure:

the ability to choose your next step without immediately worrying about where the money will come from.

Once you have established even a basic cash buffer to handle life’s surprises, you can safely move on to your next big decision: whether you should use extra money to repay loans or start investing first.

If We Had an Emergency Fund…

I sometimes think about those two experiences.

In 2007, we had to wait for my father’s pension before we could take him to the hospital.

In 2021, we had to arrange ₹50,000 urgently before my sister could be admitted to a hospital in Guwahati.

Neither experience was something we had planned for.

Neither emergency arrived at a convenient time.

And neither could be solved simply by saying, “We will arrange the money somehow.”

We had to find the money while dealing with fear, uncertainty and the pressure of making decisions quickly.

These experiences taught me a lesson that no financial book could have taught me in quite the same way:

Money is not only for buying things or creating wealth.

Sometimes, money is there to give you the ability to act when action cannot wait.

That is what an emergency fund is for.

You may never need to use it.

And that is actually the best outcome.

But if the day comes when you suddenly need ₹20,000, ₹50,000 or ₹1 lakh immediately, you may be grateful that you prepared for a day you hoped would never come.

You cannot predict every emergency.

You cannot know exactly when it will happen.

You cannot always know how much it will cost.

But you can make sure that, when the unexpected happens, a lack of immediately available money does not become an additional emergency.

The MoneyDecider Principle

Before you invest for tomorrow, protect yourself from the emergencies of today.

Build your emergency fund first.

And if you can, protect yourself further with appropriate health insurance and other forms of financial protection.

Because when life gives you no time to prepare, the money you prepared earlier can give you time to think.

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