How Having an Emergency Fund Can Help You
Our site has several articles explaining why you should have an emergency fund. That’s because saving for emergencies is critical. Emergency situations happen to everyone, no matter what you do or how much you earn, so it’s important to prepare for them. An emergency can occur without any warning and, if you don’t have savings, you could soon find yourself in serious financial trouble. Sudden emergencies are one of the main causes of serious debt trouble. If you don’t have money for an emergency, and you’re faced with an unexpected situation, you might need to take on debt to make ends meet.
One major reason for having an emergency fund is in case your lose your job or are otherwise unable to work. This is a big one. If you aren’t earning your full income (or any income at all) this obviously makes it very tough to afford your monthly expenses. You could very quickly have difficulty paying your rent or mortgage, as well as affording food, transportation, utilities, and many other bills.
If you have an emergency fund, you’ll be able to dip into it to make ends meet. This will mean you won’t have to take on new debt to afford your daily life.
However, a lack of employment isn’t the only reason you should save for emergencies. Here are several other reasons why an emergency fund is important.
You May Need to Travel Last Minute
There are many reasons why you might need to travel without much notice. For instance, you may need to visit an ill loved one who lives far away. If you don’t have money saved for emergencies, you might not be able to make this trip (or you could end up having to go into debt to afford it). The last thing you want in a stressful and emotional situation is financial stress. If you have an emergency fund, you can use the money you’ve saved to pay for at least some of your trip, reducing some stress during this difficult time.
If you need your car to get to and from work, you know what a big deal it would be to have to go without one for a while. Unfortunately, if you don’t have an emergency fund, you might not be able to afford an unexpected car repair. If something goes wrong with your vehicle, repairing it could be expensive. If you have an emergency fund, you’ll be able to cover the cost and get back on the road.
The same is true for home repairs. If your roof starts to leak or your basement floods, you could need to pay for repairs quickly. Even if you have home insurance, there’s likely a deductible and these can sometimes be very costly. Emergency savings can help you cover these costs.
If you own your own home and your fridge, stove, or washing machine breaks, you’ll need to buy a new one or repair the one you have. If you don’t have any money saved for emergencies, you’ll either have to learn to live without these major appliances for a while (which can be very difficult – and potentially impossible – to do) or you’ll need to borrow money to repair or buy a new appliance.
A Death in the Family
The death of a loved one is obviously a traumatic and emotional moment. Unfortunately, it can also be an expensive one. Burials, funerals, and other ceremonies can come with high price tags and, if your loved one didn’t have money put aside that can be used cover these costs, you may need to pay them.
Paying for Medical Bills
Even if you have health coverage (either through the government or with a private plan), unexpected health care costs can be very tough to deal with. Even if the treatment is covered, you’ll likely still need to pay for medication, rehabilitation, and potentially travel if you need to get treatment away from home. All of these costs add up and its tough to afford them if you don’t have money saved for emergencies.
How to Save for Emergencies
As you can see, there are many reasons why everyone should have an emergency fund. If you don’t have one, or if you don’t have as much saved as you’d like, take a look at your budget and analyze your spending. See where you can make cuts and focus on putting a certain amount aside each month for emergencies. Over time, you’ll build up an emergency fund that will help you avoid debt troubles when the unexpected happens.