Emergency Reserve: Building Your Financial Security
An emergency reserve is a cash reserve in the form of an interest-bearing savings or money market account that is always available and easy to get to in case of emergency. No matter who you are, you need one. It’s your first step in building your financial security. An emergency fund creates a margin of safety that helps you weather storms and endure uncertainty. The Bible endorses this principle several times, suggesting it is important to God and that He cares about even the small details of your finances. Although it may take time to reach this goal, creating your emergency fund is vital to your success in the future. Like many people who have been affected by recent economic recessions, you may have had a reserve in the past, but need to begin the process of rebuilding one for the future.
An emergency fund is closely tied to the process of creating wealth. In the Bible, creating wealth is promised as a result of having the ability to hold onto what you receive. Matthew 25:29 describes this divine promise of increase to the faithful steward: ”For whoever has will be given more, and they will have an abundance.” The word “has” is the Greek word echo. This word can also be translated “to hold onto” and it speaks of the steward’s ability to hold onto possessions and wealth, not in the sense of hoarding, but in the sense of maintaining and protecting through the storms of life. That’s why having an emergency reserve is so important – it empowers you to hold onto your wealth through challenging times.
The principle of saving can be found in Proverbs 6:6-8, “Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest.” Like the ant, each of us needs an emergency fund. If you don’t already have one, this could be one of the most important steps you’ll take this year to get your finances in order. It’s like armor to a soldier – it will protect you from danger and help preserve you. It’s your first step in preparing for crises that will undoubtedly take place from time to time as our economy experiences more ups and downs.
Unfortunately, very few people have the emergency reserve they need. According to the Federal Reserve, the US Census Bureau and the Internal Revenue Service, the average American holds only $3,800 in savings, and according to bankrate.com, 28% of people have no savings whatsoever. Without this important margin, you’re really living on the edge. Without a margin of safety, a decline in income or an unexpected expense can literally take you to the brink of disaster. If and when surprises show up, they can prevent you from paying your regular monthly bills. This type of situation can generate a great deal of anxiety, but it is preventable.
With God on your side, and an emergency fund at your disposal, you’ll be in a position to survive even the most challenging of economic times. No matter what happens to other people around you, your margin of safety will help you through. In addition, having an emergency reserve available to you will enable you to negotiate the best deals on purchases that you need by paying for them with cash.
The modern-day savings account really dates back to the storehouse principle that Joseph, the great-grandson of Abraham, used to “see ahead and provide” for the needs of an entire nation, as well as his own family. Joseph set aside enough resources in an emergency reserve so that when a season of famine came, there was enough of a supply for everyone. In those days, grain was exchangeable like money is today, so the storehouse he created then would be the equivalent of an enormous savings account today.
The same way that Joseph interpreted Pharaoh’s dream of the ups and downs of the economy, we should interpret the signs of our times and plan for future economic down- turns. Proverbs 27:1 warns us that we live in a world that brings forth uncertainty: “Do not boast about tomorrow, for you do not know what a day may bring forth.” In Proverbs 10:5 (NASB), Solomon says “He who gathers in summer is a son who acts wisely…” That means when income is coming in steadily, it is wise to set aside some of it into an interest bearing account. There’s no question that believers can exercise their faith for miracles during seasons of famine. However, creating an emergency reserve may pre- vent you from needing a miracle in the future.
How much of a reserve do you need? An ideal amount would cover six months of your regular expenses. While that may seem like a large amount to most people, the key is to start where you are and do something. Start by looking at your budget and deciding how much money each paycheck you can live without. In order to accomplish this, you will likely have to reduce some expenses or find a way to increase your income through additional jobs or creative moneymaking projects. Although it takes time to adjust your lifestyle and make the changes necessary to build an emergency reserve, it is worth it in the long-run. No matter what things look like, in this case, doing something is always better than doing nothing.
The key to creating your emergency fund is to be intentional. That means sitting down with your bills and creating a budget that includes setting money aside into a reserve account. Better yet, set up your account so that money is transferred automatically each week or each month. It may be challenging at first, but if you can build your lifestyle and spending around the amount that’s leftover, you will begin to create the margin of safety that will enable you to weather the storms of life. Don’t be discouraged if you’re in a position to start small and build over time. Start where you are! Take some time to ask the Lord for wisdom regarding your emergency reserve so you can begin to build or re- build your financial security. Position yourself to receive the promise Jesus described in Matthew 25:29: “For whoever has will be given more, and they will have an abundance.”
By Jon Oral Nash