Before getting serious about my finances, I’d never even heard of an emergency fund, let alone why it’s important to have one. However, in today’s economy, it is even more important than ever to be prepared with an emergency fund.
Here are 5 reasons why:
- Cover a Job Loss: No matter if you are laid off or fired, having some sort of emergency money saved up can be a stress-reliever when you no longer have a steady income coming in. It generally takes some time before you find another source of income and in the meantime you will still have bills to pay. Paying them out of your emergency fund rather than racking up high-interest rate credit card debt is the best way to go.
- Medical Expenses: Getting sick happens from time to time, and hopefully you can recover quickly, but sometimes illnesses are serious and require lots of medical attention. Healthcare is expensive, especially if your insurance doesn’t cover very much of it, and you don’t want to be worried about money instead of your health. Having an emergency fund will prevent that.
- Death of a Loved One: Death is, unfortunately, a part of life. If you lose someone who was generating a large portion of your family’s take home pay, you don’t want to be stressed about money while you wait for life insurance to kick in when you should be grieving together with your family and friends. Or, if you lose a long-distance loved one, you don’t want to be faced with the difficult decision of whether or not you can financially afford to attend their funeral or other services. An emergency fund can really bring you peace of mind during difficult times like these.
- Repair Expenses: If you own a home or vehicle, having an emergency fund should be a priority. Both of these things require regular maintenance and occasional repairs. Repairing your home as needed is important to prevent long-term problems. As far as vehicle repairs, particularly if you use your vehicle to get to where you earn your income, having an emergency fund to help you afford vehicle repairs is important as well. After all, you can’t fix your vehicle without money, but you can’t easily get to work and earn money if your vehicle is out of commission.
- You’re Forgetful: Forgetfulness happens to all of us now and then but when you forget about a huge bill or other upcoming expense, like property taxes or your annual insurance premium, having an emergency fund can be a real lifesaver.
These are just 5 examples of why everyone should have an emergency fund of some kind. No matter where you decide to store it or how much to keep in it, having at least some money set aside for unforeseen circumstances. is a good idea. After all, in life you can expect the unexpected.
Do you currently have an emergency fund?
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Contributed by Catherine Alford of Survival Based.