At the age of 17, I was introduced to the concept of an emergency savings account by my grandmother, Nellie. It was summer and one of my weekly duties was to clean my grandmother’s house. While I cleaned, she baked fresh, farmhouse bread. After cleaning, we usually shared warm bread, clotted cream and tender conversation.

One day, my grandmother said, “Come with me, I want to show you something.” I sat on the bed in one of her spare bedrooms while she rummaged through a bureau drawer. She pulled out a tan support stocking, the kind held in place by a garter belt. One end was tied in a knot and the other end wrapped with a rubber band. Between the knot and rubber band was socked away the sum of $1000. My grandmother was 73 years of age at the time.

“You’re going off to college soon,” she said. “ I want you to know how important it is to have some money tucked away for yourself just in case you need it. There may come a time in life when you want to leave a marriage, you might have a sick child that you need to help, or you may need to buy something that is no one else’s business.”

Decades later, years after she had passed away, her voice and words came back to me many times over. “There may come a time….”

My grandmother’s idea of an emergency savings was both an escape plan as well as preparing for the unexpected. The emergency savings I’m talking about is a savings fund that will protect you against an interruption in your income. You would only use this money to cover ordinary living expenses if your regular flow of money was interrupted or significantly reduced.

So, let’s define some situations which may cause your income to be less than ordinary. One possibility is job loss. Financial professionals suggest saving between three months to one year of living expenses in case of job loss. The amount you need to save will depend on how fast you believe you will find another job. According to some experts, for every $10,000 you make in salary add one month to your job search. For example, if you make $80,000 a year it may take 8 months to find a new job. Are you prepared to live off your savings for 8 months? If you are thinking, “unemployment compensation will cover my expenses,” it will cover some but probably not all monthly expenses.

Maybe you are self-employed with a fluctuating income. You may have months where no money comes in and other months that are quite abundant. Such is the case of a realtor or a commission-based salesperson. Having a savings to rely on in “drought” months is Lady Clairol in a bottle.

Another situation that can create an interruption to your income is caring for an aging parent. You might need to take certain days off every month to transport your parent to and from doctor appointments. If your parent is in fragile health, more of your time may be required to plan care. Right now, can you afford to have one less day of pay a week if you need to take your mom or dad to physical therapy?

Caring for your own health problems may require time off work with resulting loss of income. No one ever wakes up in the morning thinking “today is the day I’m going to have my health crisis.” Being prepared for these unforeseen events can help you focus on the process of healing, rather than worrying about how you are going to make the mortgage payments.

Having money set aside in case of an emergency gives us peace of mind. It can reduce our worry in a time of stress, give us time to gather our resources to come up with a strategy and create breathing room.

Here are some ideas to help you get that emergency savings in place.

• If cash flow is limited, secure a zero percent credit card to use for your emergency. Define clear boundaries for this credit card’s use. This is a preferred strategy to placing expenses on your home equity line of credit or taking a loan from your 401K. Placing money on your home equity LOC places your home at risk if you aren’t able to make payments. If you take a loan from your 401K, you get to pay penalties and tax TWICE…once when you take out the loan and again when you take the money out for retirement.
• My preferred method of funding an emergency savings account is to save monthly for it, even if it takes more than a year to fund. Begin by deducting a certain amount out of your paycheck into a designated emergency savings and before you know it, you’ll have a healthy stash. If you are self-employed, pretend your emergency savings is a monthly bill and get in the habit of paying that bill first.
• Protect yourself with a disability policy, a standard benefit most employers offer. If you are self-employed purchase a policy on your own. Read and understand your short and long-term disability policy. Make sure the payout amount covers your monthly expenses. If there is a 90- day waiting period, make sure you have enough money put aside for those 90 days prior to coverage kicking in.
• Consider Long Term Care Insurance as part of your emergency savings plan. Women live longer than men in general. Annual LTC insurance premiums may be less expensive than the cost of one month in a skilled nursing facility.
• Your savings needs to be liquid and easily accessible to you. A bank savings or money market account serve this purpose, unless you’d rather be like my grandma, Nellie, and use a support stocking!

I leave you with my grandma’s parting words, “I want you to know how important it is to have some money tucked away for yourself just in case you need it.”