An emergency fund is like windshield wipers on a car. You don’t need them most days. However, they’re invaluable when the rain is coming down in torrents. Eventually, everyone will face a time when they face sudden expenses, and it’s best to be prepared.
Similarly, when a financial hardship strikes like a rainstorm, you’ll be relieved that you set some funds aside for an emergency. There are at least six good reasons why everyone needs to have an emergency fund.
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1. You Lose Your Job
We’ve all learned from recessions and pandemics that seemingly stable jobs can disappear overnight. Living paycheck to paycheck is frightening under even the best circumstances, but it’s devastating after a job loss.
An emergency fund allows you to maintain normalcy while looking for new employment. If you’ve saved the recommended three to six months of funds, you won’t panic if you don’t get a job offer in the first few weeks.
2. Your Family Has Only One Income
If you have two incomes in the family and one dries up, you can always downsize to fit your lifestyle around the remaining income. However, having only one money earner in the family makes creating an emergency fund even more valuable. It’s like being alone in the wilderness when no one is coming to save you. You have to have the necessary survival equipment ready.
3. Unexpected Repairs
Your car may break down the first week of your new job. Your refrigerator freezer could stop working once you stock it with food for the winter. And your plumbing might spring leaks just hours before the big family reunion dinner.
Expect the unexpected. Having an emergency fund can turn disasters into mere inconveniences.
4. Health Emergencies
No one likes to consider the possibility of developing health issues, especially those our insurance doesn’t cover. Nevertheless, the reality is that even the best health insurance leaves gaps in coverage, forcing out-of-pocket expenses.
Don’t minimize health dangers. But that’s what you’ll likely do if you can’t afford treatment. Instead, set funds aside so you or your loved one can receive prompt medical attention.
5. Necessary Travel
Unfortunately, sometimes life requires us to drop everything and make distant trips. For example, we might have to travel to the other side of the country to help aging parents or other relatives. Sadly, sometimes we’re traveling to attend a funeral.
Few experiences are more painful than being unable to be at someone’s side when they need you the most. An emergency fund can help you be with the people you love.
6. It Can Protect Your Other Savings
Are you trying to save for a large purchase, such as a new car, college tuition, or a house? If so, an emergency fund can be helpful. How?
If you don’t have an emergency fund, you’d have no choice but to borrow from your primary savings account when unexpected events happen. But with an emergency fund savings account, your primary savings are protected, and you can remain on schedule to reach your financial goal.