I’ve always thought an emergency fund is a great tool to help you succeed financially.
Recently, I’ve changed my mind about emergency funds.
They aren’t just a great tool to help you succeed financially.
They can save your life. Literally.
On October 9th, 2018, my family evacuated from our home in Panama City Beach, Florida.
Hurricane Michael was headed our way.
At the time, hurricane Michael was forecasted to make landfall the next day as a category 2 or category 3 hurricane.
What happened in the following days changed the county I live in for the foreseeable future. It will never be the same.
Unfortunately, not everyone in our county had emergency funds. Those without emergency funds might not have been able to leave town to escape the storm.
Here’s what happened, why I now believe even more that emergency funds are essential and what you should do to start your emergency fund today.
Hurricane Michael Hits Bay County, Florida As A Category 4 Hurricane
After my wife and I evacuated, we were glued to the news to see if our county would be spared. Unfortunately, it wasn’t.
Hurricane Michael came ashore as a direct hit to our county on October 10th with sustained winds of 155 miles per hour, just two miles per hour shy of a category 5 hurricane.
Myself, my wife, our son and our dog were lucky enough to be able to drive four hours west to Gulfport, Mississippi and stay in a hotel room while the storm came through and the cleanup effort at home began.
Not once did we worry about money because we had our emergency fund. Others weren’t so lucky. In fact, if a person didn’t have money to evacuate and stayed home, their lives were at risk.
Once the storm got close to landfall, emergency services could no longer operate. After the storm passed, even if first responders wanted to go out and help people, they couldn’t.
Roads were completely obstructed, there was no power, cell phones were down and there was no way to communicate. Some people couldn’t get in touch with loved ones for days.
How Emergency Funds Can Make A Difference And Save Your Life
If you don’t have an emergency fund, you aren’t alone. In fact, 40 percent of people won’t be able to handle a $400 emergency without either selling something or going into debt according to the Federal Reserve.
As I found out first hand, an emergency fund is essential. It could literally save your life.
If everyone in Bay County had a $500 emergency fund, they all would have been able to evacuate and find a hotel out of harm’s way.
Even if they didn’t have transportation, they could buy a bus ticket out of town or pay someone to take them to a local shelter to ride out the hurricane.
If everyone in Bay County had a $1,000 emergency fund, they could have stayed evacuated until it was somewhat safe to return home.
They may not be able to afford a glamorous hotel, but they would at least be safe where there was power, water and they could feed themselves.
The Aftermath Of Hurricane Michael
The day after Hurricane Michael made landfall, October 11th, my wife and I couldn’t believe what we were seeing on TV.
The devastation was unreal.
While our house in Panama City Beach appeared to have mostly been spared, just five to ten miles away there was complete devastation.
Homes were leveled. Acres of trees were snapped in half like toothpicks without one left standing. Our entire county was basically without power.
It was clear this storm would have a major impact on our county for the foreseeable future. However, as we learned more about the true extent of the damage we realized this was no normal hurricane.
It Took Weeks For Most To Get Basic Utilities
It took roughly two weeks for the power company to restore power to 95 percent of people in our county, but that 95 percent only counted those that could safely receive power.
Those in outlying areas served by other utility companies are still without power in some areas three weeks later.
If there was damage to the power infrastructure on a person’s home, the homeowner or landlord had to fix it with a licensed electrician before they could receive power.
It took a week or so for cell phone services to be back to normal. While a couple providers survived the storm, other cell phone providers were completely obliterated.
We had a boil water notice for weeks. In fact, some people still have boil water notices three weeks after the storm.
It could be months before areas of our county have access to the typical internet and cable TV other than through their cell phones.
Even once people had these essential and useful services restored to their homes, they had bigger issues to deal with.
Our Entire County Ground To A Halt
There was a curfew put into place. Traffic was insane. Power crews lined the sides of the roadways. Debris and downed power lines littered the sidewalks and roads.
During the first couple weeks after Hurricane Michael, our county ground to a halt.
Most schools won’t be opened for three and a half weeks. Both hospitals only had ER services open in the first couple of weeks after the storm. They literally could not admit patients to anywhere but the ER.
One of our county’s hospitals, the one my wife works at, won’t be back to normal operations for roughly three months.
Some businesses that were completely destroyed have no timeline for when they’ll reopen. Even the businesses that survived are mostly operating on limited hours because they don’t have enough employees to stay open for their regular hours.
As you can imagine, all of these things can put a major negative impact on a person’s earnings.
Many large companies were very generous and did amazing things to help their employees. Some even continued to pay their employees even though no one was working.
Sadly, not all companies were so lucky. Many businesses can’t afford to keep paying their employees. They’re not even sure if they’ll be able to reopen.
Having An Emergency Fund Can Save Your Finances
If everyone in Bay County had a two-month emergency fund, they could afford to evacuate and pay their bills for the next month while they waited for everything to get sorted out.
They wouldn’t have to worry about how to pay the rent or mortgage next month if their house was spared.
Homes, Apartments And Rentals Were Destroyed Or Heavily Damaged
Even if you had enough money to evacuate and live for a month or two without working, you had bigger problems on your hands. The vast majority of the homes in our county received some sort of damage.
I’ve heard stories from people that stayed in their homes during the storm.
They heard debris hitting them homes. They heard trees cracking and falling, sometimes on their roofs. They saw the walls and windows move in and out as if they were breathing. It had to be terrifying.
After the storm cleared, people were happy to have simply survived. However, after examining their surroundings, most homes had some form of damage. Many homes had major damage.
The Florida heat and humidity meant that mold could start forming quickly unless you could dry out your home. The problem was, it wasn’t an option.
Instead, people had to sit and wait. They could try to fix their home as much as they could themselves, but it would take real contractors coming in to fix the issues with these homes.
Some people were able to tarp their own roofs while others hired contractors. Unfortunately, the damage was already done.
In Florida, we have special deductibles for windstorms which also include hurricane.
Most people have a deductible of at least 2% of their home’s insured value. For a home insured at $200,000, that means the person would have a $4,000 deductible.
The average person living paycheck to paycheck didn’t know how they were going to pay their normal bills. Adding a $4,000 hurricane insurance deductible on top just added insult to injury.
Even if you were a renter, you had huge problems on your hands. Many homes simply became unsafe to live in after the storm.
Apartment complexes had major roof and water damage. Many people had to leave their apartments and homes but had nowhere to go.
Panama City Beach, located on the west side of our county, was mostly spared. However, the available affordable housing in Panama City Beach was snapped up almost immediately.
People that had to leave their homes have no options for temporary housing while they wait weeks or months for their homes to be fixed.
Even if renters had renters insurance with a loss of use clause that paid for temporary housing, they would have to go hours away from their homes to find a place to stay.
Having An Emergency Fund Can Help You Keep A Sense of Normalcy
If everyone in Bay County had a six-month emergency fund, they’d be able to pay their 2% hurricane deductibles on their homeowner’s insurance policy.
They could afford to wait for their jobs to open back up, which could take months. Renters could temporarily relocate until their rentals are habitable again without worrying about how to pay for temporary housing in another town.
Start Building Your Emergency Fund Today
It should be obvious by now. You need an emergency fund. Ideally, you’d have a six-month emergency fund.
But let’s be honest. No one can come up with a six-month emergency fund quickly. It takes time.
Instead, you should start to build an emergency fund today. Take whatever you can and put it in a savings account to get started.
Then, each paycheck or each month contribute more money to the emergency fund.
Over time, your emergency fund will slowly build.
You’ll get to the $500 emergency fund that would have let you evacuate. You’ll get to the $1,000 emergency fund that would let you stay out of town until it was safe to return.
Eventually, you’ll get to the two-month emergency fund you could use to pay your bills when you can’t get back to your job.
One day, you’ll eventually fully fund your emergency fund with six months of expenses so you could weather the hurricane without the fear of running out of money.
You could pay your hurricane insurance deductible, find a temporary place to stay and not worry about being out of work for three months while they rebuild your place of employment.
How To Start An Emergency Fund
Personally, I recommend opening a separate savings account at a bank you don’t normally do business at to start your emergency fund.
This keeps the money separate and reduces the temptation to spend the money on things that aren’t emergencies.
Right now, CIT Bank has an amazing savings account with a great interest rate. If you open your account with at least $100 and deposit at least $100 per month in a single deposit, you get access to an amazing interest rate.
Alternatively, if you put more than $25,000 in the account, you don’t have to continue depositing $100 per month to get the great rate.
We Will Recover – We Will Rebuild
Eventually, our county will recover. For the most part, we will rebuild.
Some businesses may not come back, but others will take their place. It won’t be a fast process. It will take months before things even start looking somewhat like normal.
It will be years before everything is rebuilt. It will be decades before the trees pop back up in the skyline like they used to.
It won’t be cheap. People will have to fight with their insurance companies to get the money they deserve for their claims.
People will have to pay their hurricane deductibles and shell out even more money to rebuild and repair their homes in many cases.
Even with all of that said, our community is strong. We won’t let Hurricane Michael keep us down. We’ll help each other until we get back to normal.
My Family Was Extremely Lucky
For those that were wondering, my family got extremely lucky. A couple of years ago, we moved from in town where the hurricane damage is the worst out to the beach which was mostly spared.
We had a few shingles fly off the roof and a few fence panels blow apart, but I was able to fix those issues by myself. My wife will likely be out of work until January, but I can pick up extra work to offset the lost income.
My parents received quite a bit more damage to their house, but it’s repairable. My Aunts and Uncles also received some damage, but nothing that will prevent them from living in their homes.
We’re extremely thankful that we got as lucky as we did.
Our hearts are heavy for our community. Please keep Bay County, Florida in your thoughts and prayers over the coming months as we recover and rebuild.
Remember, if you don’t have an emergency fund, it could literally save your life. Start one today.
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Lance Cothern, CPA holds a CPA license in Indiana. He’s a personal finance, debt and credit expert that writes professionally for top-tier publications including U.S. News & World Report, Forbes, Investopedia, Credit Karma, Business Insider and more.
Additionally, his expertise has been featured on Yahoo, MSN, USA Today, Reader’s Digest, The Huffington Post, Fast Company, Kiplinger, Reuters, CNBC and more.
Lance is the founder of Money Manifesto. He started writing about money and helping people solve their financial problems in 2012. You can read more about him and find links to his other work and media mentions here.