While it may seem like just an extra expense, creating and maintaining an emergency fund is vital to your financial plan and success. The proverbial rainy day surprises us in the most unexpected moments, and when it does, you'll be relieved to find yourself prepared with an emergency fund.
Let's be honest. You won't be able to completely prevent every single accident, disaster, or mistake in your life. For right now, let's consider any potential losses you could experience by any of these occurrences as a "risk." Now, some of those losses can be transferred to someone or something other than yourself, thereby lowering your risk. Insurance is a great example of this: the insurance company assumes the risk of any mishap covered by your policy. Any risks you don't eliminate or transfer elsewhere are "retained risks" because you would assume all losses resulting from any of the remaining risky events. You probably won't be able to insure yourself against an alien invasion or store about a century's worth of food, but there are certain things you can to retain as little risk as possible for yourself.
How much should I save?
You may be wondering just how much is enough to keep in an emergency fund. While it may be difficult to save much while you're a college student, it is recommendable to have about 3-6 months' worth of expenses in your emergency fund. To estimate this amount, consider all of your monthly costs: housing, utilities, insurance, healthcare, food, transportation, debt, school supplies, personal care, etc. If you're still in school, it might be a good idea to also consider tuition costs here. Then, start saving! Create a financial plan that will allow you to reach this goal or as close to it as you can get right now. Be smart about your spending: save money wherever you can.
Even though you may not be able to reach the ideal amount of saving up to six months of expenses, you should set realistic saving goals for yourself so as to lower your retained risks and create more financial stability for yourself in case of an unfortunate event, such as unemployment, loss of a scholarship, natural disasters, etc.
Apart from being financially prepared, you should also create a food and water storage supply. Again, make sure you have enough supply to last you and your family at least three months. Building a food storage supply of this size may seem daunting at first, but it doesn't have to be. Start slowly, purchasing nonperishable foods such as canned goods, pasta, grains, or beans. You don't have to purchase it all at once; just budget in an extra dollar or two a week. Be sure to set the food for storage, well, in storage (aka in a place where you know you won't eat it!). Don't forget to check the expiration dates every month and rotate out food as needed.
Food storage isn't just about quantity; you need to make sure the food you're storing is also high in quality. Purchase foods high in energy (calories and carbs), nutrients (including minerals and vitamins), and proteins. Make sure you have plenty of variety. Don't overlook this important aspect of food storage! Your retained risk could skyrocket if you added malnutrition to the bill.
For more helpful information on food storage and how to begin, click here.