We made the decision to increase our savings to $10,000 while we continue to make monthly payments to the car of $400. Friday was our payday and today I received the reimbursement for our daycare and medical flex. I transferred $500 from our paychecks along with the entire reimbursement. Our saving account is now at $8198. When I saw that balance, I immediately felt a huge sense of relief so I know I made the right decision.
Should an emergency arise, it is more important for us to have savings than a paid off car. Now I just need to get to $10,000 and start paying on the car. :)