Is It Ever OK to Skip Saving Up an Emergency Fund?

Most experts recommend that you save up three to six months of living expenses in a high-yield savings account. This can sound like a huge financial burden, especially given that the average personal monthly expenses in the U.S. are $3,405. If you spend what most people do, you'd be looking at saving up between $10,215 and $20,430!

If that seems overwhelming to you, you may be wondering if it's ever OK to skip saving up an emergency fund. The reality, however, is that it's rarely if ever a good idea not to have money for emergencies. Here's why.

Emergencies can happen to anyone

The sad reality is, emergencies can happen to anyone at any time. Pew Charitable Trusts found that 60% of households had experienced a shock over the past year with those unexpected expenses having a median cost of $2,000. Both high- and low-income households were found to have experienced surprises that cost them money.

Often, these surprise expenses cannot be put off. For example, data from the Federal Reserve revealed about 20% of adults experienced a major unexpected medical expense over the prior year. When you need medical care, you can't just wait to get it if you're ill-prepared for the costs.

Since no one is immune to emergencies, virtually no one should skip having an emergency fund. Everyone needs to be prepared when they face a spot of bad luck.

Not having money for emergencies can have devastating long-term consequences

Another big reason why it's not OK to skip having an emergency fund is because the consequences of doing so can be dire.

The Pew research found more than half of all households struggled to cover their basic costs after a financial shock, with 50% of survey respondents saying they still hadn't recovered from the impact even though at least six months had passed since their unexpected expense.

People who had experienced a shock were also more likely to have credit card debt and their median liquid savings was almost $4,000 lower than households who hadn't. The Federal Reserve found that 15% of adults had lingering medical debt after surprise healthcare costs.

If you do not have money when an inevitable surprise expense arises, you could find yourself charging it. If you have to do that, you'll have credit card interest and monthly payments to contend with, which make your unexpected expense costlier and leave you with less to live on going forward.

Even retired people need money saved for surprise expenses

Sometimes, people assume that once they're retired they no longer need an emergency fund since they can't face a job loss. That's not the case. Retirees are no more immune to surprise expenses than anyone else, and are often more likely to incur unexpected healthcare bills.

Seniors on a fixed income can't and shouldn't just take money out of their brokerage account to pay surprise bills or they could find themselves facing long-term financial shortfalls. So, even those who no longer work need emergency savings.

Here's when you might be able to skip emergency savings

So, is it ever OK to skip emergency savings? In pretty much all situations, the answer is no -- with one limited exception.

If you have an extremely stable income and you have enough money in dedicated savings accounts for the most common expenses you're likely to incur, then you may not need a big account specifically dedicated to emergencies. For example, you may be able to get away without an emergency fund or with a very small one if you have money set aside for:

• Medical expenses
• Home repairs
• Car repairs

Even in this case, though, you could still face unexpected costs. For example, you might have to travel to a funeral and need money to pay for it. So, you should still think seriously about whether having at least some emergency savings is right for you.

The bottom line is, as intimidating as it can feel to save for emergencies, you're far better off making a plan to put money away for unexpected expenses than you are scrambling to cover costs when they come up. So, skip a meal or two out, consider doing some side work, or save windfalls like your tax refund so you can put away some funds in an emergency savings account. You'll be very glad you did when your surprise expense occurs.