A Squirrel Fund

Cathy's husband works construction, so in the winter, they barely scrape by. Should they build an emergency fund for the slow times?

QUESTION: Cathy’s husband works construction, so in the winter, they barely scrape by. Should they build an emergency fund for the slow times? Dave says yes, but he would give the account a different name than the emergency fund.

ANSWER: A little bit like that, Cathy, but I would name it differently. I would just call it your squirrel fund because in the winter, the squirrel needs to have some nuts saved up in the nest. So you’re putting money aside in the summer to get ready for the winter.

That’s really not an emergency fund. That’s really just planning for a downtime—the seasonality of his work. Separate from that, you need to build your emergency fund. And I would keep working your Baby Steps on that. I’d have $1,000 in my emergency fund. I would build my squirrel fund to be ready for winter—whatever that needs to be—and you need to plan that out. What did he make last winter and how much did that leave you short per month? Do a budget, and then put that in there.

So this is not a random amount of money. It’s an exact amount of money. Teachers need to do the same thing if they’re not paid 12 months a year. If they’re paid nine months a year, how do they survive the summer? If they need to cover bills in the summer, if they’re married and the spouse doesn’t cover the bills in the summer, then you need to set up some money during those nine months that you are working to be ready to roll.