Monday, October 18, 2010

Emergency Essential Expenses Account vs. Emergency Fund

I have always thought of our Emergency fund as just that. Money in the bank to handle emergencies. As we have been working on digging ourselves out of the financial abyss of debt that we created, I happened upon the blog of Gail Vaz-Oxlade. She suggests that one should have an Emergency Essential Expenses account, similar to the good ol' Emergency Fund. What the heck is the difference?

Well, in our home, the difference is for things expected and unexpected. Our Emergency fund is available for when something arises that we couldn't have forseen happening, like needing to fly to another province for the funeral of a family member. It's for having to pay costs up front for cleaning when the water heater blows up, and soaks everything in the basement. (Not that we have a basement. I'm just trying to make a point here.) These types of things constitute a true emergency.

So what is an EEE Account for? For someone, like me, who is self-employed, having money set aside to pay our essential expenses, like rent and groceries, if or when the time comes that my income isn't suffcient to do so for a length of time. For someone employed by a company, it could be a life saver if they unexpectedly got laid off due to a company closure.

One thing that has become apparent in the last few years, is that no job is totally secure, and we all have felt the crunch during an unstable economy. Yes, people still need the services of others in many industries in down times. But companies cut costs wherever they can in order to keep said company alive and viable.

I took a hard look at our budget several months ago, and devised a gameplan of what to do if either B or I were suddenly without work. It scared the bejeepers out of me to see the income side of the budget take a nosedive. We would have to cut out many of the comforts that we enjoy now. But it also taught me that saving for something that is a very real possibility is something that everyone should do, and not wait for something bad to happen first.

Our Emergency fund is there to take care of expenses that we can't imagine yet. But knowing there is something there helps me to sleep at night. Our EEE account however, is an entirely different creature, growing slowly and steadily toward the goal of providing us with six months of expenditures on only our essentials, just in case the ka-ka hits the fan. Included in that is rent, telephone, cellphone & internet service (needed for my business), groceries, insurance, and a lowered transportation amount. That's it. I'd likely cancel our cable, and cut many other things from our budget like entertainment, dining out, childcare and spending money.

If our situation were to change suddenly and drastically, I wouldn't want to have to worry about where the money is coming from to pay the bills. I definately wouldn't choose to put our life expenses on credit, to be paying them off with interest over the next 10 years.

How about you? Do you have an Emergency fund or an EEE account, or both? Is there a difference for you?


  1. Our Emergency Fund is the same as your EEE. It is growing slowly to provide replacement of income if one or both of us is unable to bring in a paycheque. It is not meant to be touched for any other reason, and so far (we started it 12 months ago) we have almost 1 month's worth of "expenses" saved (not essential expenses).

    What you call your Emergency Fund, is what we call our "planned spending" fund. My goal is to keep the balance above $1500 consistently, to cover a completely unplanned surprise emergency expense, while the surplus above $1500 can be used to upgrade the house or yard, buy fun things, take a trip... whatever we want.

    Unfortunately we depleted this account in the summer when we had a few too many surprise expenses. We are in the process of rebuilding it - we currently have just over $500.

  2. Thanks for your insight. It's nice to hear how other people manage these types of accounts.

  3. I know this is an older post, but hey... ;)

    I'm currently working on beefing up our emergency fund, but i'd also like an EEE fund. If my washer were to break, i'd pull the $$ out of our emergency fund to buy a new one, without a doubt. I think a $1000 EEE fund would be nice though!