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The Importance Of An Emergency Fund For Travelers

The Importance Of An Emergency Fund For Travelers

Although we won’t be dedicating an entire month to Frugal February like we did in 2011, we’ll still be doing a 1-2 weekly posts devoted to personal finance that are relevant to you as a savvy traveler.

The first subject on our list is the importance of an emergency fund for all travelers and why you must have one before you leave on any trip.

What is an emergency fund?

An emergency fund is a reserved amount of money set aside that is easily accessible and only to be used in an emergency.

Do I need an emergency fund?

Medical Expenses

How will you pay for that unexpected hospital stay?

Short answer – absolutely. In our opinion, if you can’t afford travel insurance and a decent-sized emergency fund then you probably shouldn’t be traveling at all.

Travel insurance can take weeks, if not months to pay out. So what happens if you’re injured whilst overseas and need to pay the medical bills before you check out of hospital? Or what if a family member passes away and you suddenly need to buy plane tickets so that you can be at the funeral?

An emergency fund will enable you to pay the bills and purchase those airline tickets without going into debt which would simply compound the problem.

As a result, an emergency fund gives you a contingency plan and peace of mind when you’re so far away from home. You can now travel without worry knowing that you’ll be prepared for whatever unexpected things get thrown your way.

How much money do I need in my emergency fund?

At least $1,000, but preferably a lot more. We would recommend having around $2,000 – $3,000 which should be enough to cover most of your emergencies including that flight home.

Experts say you should have three to six months worth of living expenses but that’s typically for those who may suffer an unexpected loss of income. For a traveler wanting to make the most of their time away with cash already in savings, that’s hardly realistic or necessary.

If you can’t come up with $1,000, at least have something. Every bit helps.

Where should I keep my emergency fund?

Your emergency fund needs to be easily accessible however it should be kept in a different bank so you’re not tempted to use it for an alternative purpose. The two of us keep our emergency fund in a high-interest savings account where it earns a nice rate of interest but it could also be in our bank accounts within 24 hours if needed.

Do you travel with an emergency fund? If no, why not and will you consider traveling with one in the future?

Want to share your personal finance story and guest post for Frugal February? Please contact us – we would love to feature your writing on Don’t Ever Look Back!

17 Comments

  1. Posted February 1, 2012 at 5:51 pm | Permalink

    I so totally agree with you! An emergency fund is essential and if you can’t manage it, then you probably shouldn’t be traveling. I think the amount necessary will vary depending on where you’re traveling, but it should be enough to fly you back home on a flight out NOW if need be. You never know what might happen and you don’t want to be caught somewhere having to deal with wire transfers and such.
    Nancy Sathre-Vogel recently posted..Gatorade Angels: Random acts of kindness

  2. Posted February 1, 2012 at 6:55 pm | Permalink

    Yep – that’s definitely a good starting point. Calculate how much you’ll need for a last minute flight and then perhaps save at least 150% of that amount.

    Can’t imagine anything worse than having to worry about money when something unexpected has already thrown your plans into ruins.

  3. Posted February 2, 2012 at 7:53 am | Permalink

    I couldn’t agree more with you. You hope you never need it, then something horrible happens and you are happy that at least you don’t have to worry about getting home. I’m with Nancy. I think the size of that fund depends on where in the world you are since it influences costs for a last minute ticket as well as medical costs a lot. I am an expat, so in a somewhat different situation than a longterm traveler, but the concept is still the same. To people who really cannot afford that emergency fund, I would suggest to get a credit card for emergencies, so that you still have a way out/home if you ever need it.
    Sabrina recently posted..Only in Texas: Texas Waffles

    • Posted February 2, 2012 at 12:29 pm | Permalink

      Thanks for commenting Sabrina. An expat definitely needs a larger emergency fund than the average traveler because they still have to factor in a loss of income among other things.

      A credit card should only be used as a last resort we think because as we said in the article, going into debt often only compounds the problem.

    • Posted February 4, 2012 at 4:59 am | Permalink

      Totally! I wasn’t really advocating the credit card approach either, but I do think it’s better to have one (if you don’t have enough in your emergency fund) and have a way home rather than being stuck somewhere and not knowing what to do – even if it puts you in debt. My nightmare would be to have something horrible happen AND have no way home.
      Sabrina recently posted..What Do People Eat in China? Braised Pork Belly

  4. Posted February 2, 2012 at 10:22 pm | Permalink

    Yes, I have a emergency fund. His name is Gerard. Lol. No, but in all seriousness, we’ve set aside a last resort $, a basic (random) number for only emerg necessary situations. Luckily, haven’t had to tap into it just yet. :)
    Kieu ~ GQ trippin recently posted..Waitomo & The Road To Hobbiton

    • Posted February 3, 2012 at 10:43 pm | Permalink

      Haha I don’t see Gerard coming to your help if you get attacked by an emu somewhere in Oz! :P

  5. Posted February 3, 2012 at 4:56 pm | Permalink

    I absolutely agree with the need for an emergency fund. It’s right up there with insurance for me. Thankfully I’ve never actually had to use mine but I know how grateful I would be for it if the moment were to arise.
    Cherina recently posted..There’s Something About Melbourne

  6. Posted February 3, 2012 at 11:30 pm | Permalink

    We are hopeless and don’t have one set up but have definitely thought about it. I guess the only reassurance is having a credit card and close family and friends that I think we can rely on if we ever need to in emergencies!
    Cole @ Four Jandals recently posted..Grey Mare’s Trail – Weekly Hump Day Photo

    • Posted February 3, 2012 at 11:35 pm | Permalink

      Having a good support network certainly helps but we would still recommend coming up with at least $1000 (start slow if you need to) to cover those urgent needs if they arise.

  7. Posted February 4, 2012 at 12:34 pm | Permalink

    I don’t travel long-term, so my case is a bit different here. I DO always have a set amount of money in both my checking and savings accounts, though – that “just in case” money. So, in that sense, I always have an emergency fund! I agree that it’s always a good idea to have.
    Amanda recently posted..The South Pacific I Have Yet to See

    • Posted February 4, 2012 at 12:47 pm | Permalink

      Many would argue that it’s more important for someone who has a job and fixed bills to have a large-sized emergency fund. If for some reason you can’t work, then how are you going to cover all of those day-to-day expenses? It’s good to hear you’ve got something in place though to cover those unexpected expenses.

  8. Posted February 13, 2012 at 3:09 am | Permalink

    When I traveled I had 5K set aside as my emergency fund that I hoped I would never need and it would be my resettlement fund. People often forget eventually you come home and need money too!
    Ayngelina recently posted..Food Friday: Pave

    • Posted February 13, 2012 at 7:14 pm | Permalink

      Yes, it’s important to have a resettlement fund for when you get home – it’s already depressing enough being back, let alone being broke.

      5K seems like a good amount for an emergency fund, we had the same!

  9. Posted February 13, 2012 at 10:40 am | Permalink

    I highly recommend having your emergency fund with a different bank and transferring the funds when you need it. One, as you said, it stops the temptation to spend it, but two, it also limits the amount that might be stolen should your main account be compromised.
    My travel card was compromised or skimmed, and I had about €1500 stolen whilst I slept, due to fraudulent withdrawals. Thankfully I kept a separate bank account with my emergency funds which I used for the remainder of my trip. Not quite the pleasant experience, but it was a relief knowing that I had a back-up.
    Jeff P recently posted..Monday-itis Photo

    • Posted February 13, 2012 at 7:15 pm | Permalink

      Complete agree Jeff – keep it in a different bank, preferably one that pays a high rate of interest.

      That sucks you were skimmed but thankfully you had that emergency fund to come to the rescue! :)

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