Here's Why I Have a Separate Emergency Fund for Home Repairs

A good 63% of Americans don't have enough savings to cover an unplanned $500 expense, says SecureSave based on recent findings. As a homeowner, I find that alarming.

When you own a home, you never know when you might be faced with a sudden repair. In my experience, home repairs have run the gamut from a few hundred dollars to, more recently, having to spend roughly $12,000 to replace my heater.

That's why I always make a point to keep money on hand for home repairs. But I like to keep that money separate from my primary emergency fund. Here's why.

I want protection on all fronts

When building an emergency fund, you'll often hear that it's smart to put enough money into your savings account to cover at least three months' worth of essential bills. The logic is that if you were to lose your job, it might take you a good three months to find a new one. And with that much money in savings, you're less likely to have to resort to costly debt to cover your basic expenses.

Now, I like to keep more like a year's worth of essential bills in savings for one big reason -- self-employment. As a freelance contractor, I'm not entitled to unemployment benefits should my work go away. I'm also not entitled to severance or any other compensation. Since it's conceivable that my income could go from what it is today to $0 with pretty much no warning, I need to have that protection in the form of added savings.

At the same time, I need to make sure I have the ability to pay for home repairs. And I can't discount the possibility of having a major home repair arise at the very moment I suddenly find myself out of work.

So that's really why I keep my home repair savings separate. I want to know that I have enough money to go a year without an income in the event of an extreme situation, like a recession or personal issue that renders me unable to work. I don't like to let my primary emergency fund dip below 12 months' worth of bills.

At the same time, when home repairs arise, I generally can't put them off. I keep a separate account so I don't have to stress out immensely about my main emergency fund getting too low.

To put it another way, it bugs me when I have to withdraw funds from my home repair emergency fund, but it's also something I expect to have to do from time to time. I don't lose sleep over those withdrawals. I probably would lose sleep if I had to tap my main emergency fund for a home repair, however.

Make sure you're prepared at all times

It's important to have emergency savings no matter your situation. But if you own a home, it's especially important that you have cash in the bank for repairs.

A good 78% of homeowners had to deal with unexpected repairs in 2023, according to a recent report by Hippo. So even if you own a newer home, there's a risk of having a repair pop up.

You don't necessarily have to maintain a separate emergency fund for home repairs like I do. There's nothing wrong with keeping all of your emergency savings in a single account. But make sure you have a decent chunk of savings in case something goes wrong with your home at the same time you find yourself out of work.