A Glaring Reminder About the Importance of Emergency Funds

Most everyone knows an emergency fund is a good idea, but it’s more than a “nice to have.” In fact, many financial experts suggest that an emergency fund should precede investing when it comes to prioritizing where you put your money. In a best-case scenario, it can help replace an oven or a vehicle without forcing you to miss other bills that month. At its worst, it can act as a buffer if you find yourself suddenly out of work. Small business owners, homeowners, parents, and those with family members with compromised health know that an emergency fund is a necessity, yet nearly one in four Americans has no emergency savings at all.

Recent years have offered plenty of reminders about why this is such an important milestone to reach. Wildfires, hurricanes, and a shifting economy have each tested household finances, often without much warning. In January 2025, the Palisades and Eaton fires tore through Los Angeles County, destroying more than 16,000 homes and other structures, with total property and capital losses estimated as high as $164 billion. For displaced homeowners, insurance payouts and federal aid often took months to arrive, leaving many to lean on whatever savings they had to cover temporary housing, replace belongings, and keep up with bills in the meantime.

Businesses and everyday budgets have felt pressure from other sources, too. New tariffs enacted in 2025 pushed up prices on everyday goods like clothing, household supplies, and cars, costing the average household around $1,000 in added expenses that year alone, with some economists estimating the toll may climb higher still. That’s less room in the monthly budget to set aside savings, right when a cushion matters most.

Then came the 2025 federal government shutdown, the longest in U.S. history, which put a very concrete number on the risk of missing a paycheck through no fault of your own. More than 1.3 million federal employees and contractors went without pay for over a month, missing nearly $14 billion in wages before funding was restored. Even though federal law guarantees these workers eventual back pay, many still turned to credit cards, personal loans, and family members to cover rent, groceries, and other bills while they waited.

Not the First Time, Nor the Last

Of course, this isn’t the first time a sudden shock has rattled household finances. The COVID-19 pandemic put millions of people out of work almost overnight in 2020, and the 2008 recession showed just how quickly financial stability can unravel for families who thought they were prepared.

In situations like this, staying out of debt or recovering quickly will be more challenging for some than others. An emergency fund or “rainy day fund” is critical to help make ends meet and ride out the leaner times.

And for some, the emergency comes in the form of small, personal inconveniences that stack on top of each other until there’s no clear way out. That’s what happened to Katie, an Arizona homeowner, who noticed a slab leak while recovering from knee replacement surgery. The small leak quickly grew into a much costlier problem.

"It was bad," Katie said. "I had been happily debt-free. And all of a sudden, I couldn't pay my bills." As a homeowner, she had a major asset that could help her weather the storm.

It’s important to know your options if and when you need access to additional funds. Like Katie, you have several ways of accessing your equity, so taking the time to compare them is important.

If you’re kicking yourself, wishing you started an emergency fund sooner, take a closer look at home equity investments. You could access cash to pay down today’s debts and stash some away to start your emergency fund, without adding another monthly payment.

Find out if a home equity investment is right for you in seconds.