When the unexpected strikes, it can feel like you’ve been hit with a ton of bricks. Luckily, that’s not how the human psyche is wired.
Our brains are programmed to recognize danger and protect ourselves. When unforeseen circumstances strike, it’s important to have an emergency fund available, so you aren’t forced to choose between paying your bills or putting food on the table if you lose your job.
An emergency fund acts as a buffer against sudden financial setbacks. It helps prevent you from making rash financial decisions that could jeopardize your future if they don’t pan out. Many people don’t realize this, but having an emergency fund actually makes them safer financially and less prone to stress in the long run.
Here are six reasons having an emergency fund makes sense for everyone who doesn’t already have one set aside:
You’re Safer Financially
First and foremost, having an emergency fund is safer for your financial health. It’s far more likely that you’ll have some money saved up in case of a major financial setback than to rely on government assistance programs.
For example, if you lose your job, you should have enough money in savings to keep you afloat until you find another one. If you have an emergency fund, you have the ability to weigh options and make sensible financial decisions before they affect your entire financial future.
Reasons Why You Need an Emergency Fund
Without funds set aside for unforeseen costs, living on the edge may feel like it is your only option. Here are seven reasons why you should have an emergency fund, as well as several strategies you may use to develop one more quickly.
– Job loss
– Medical expenses
– Unforeseen home repairs
– Car Maintaince and Repairs
– Urgent pet care
– Family emergencies
– You’ll Have More For Retirement
Job Loss
If you’re self-employed, you may find that a sudden job loss can cause you to fall short on your bills. Having an emergency fund allows you to bridge the gap between income and expenses if you lose your job. It also means you have a little money saved up if you need to take time off work due to an illness or other personal emergency.
Medical Expenses
Medical expenses are the number one cause of bankruptcy in the United States. The best way to protect yourself against these costs is to have an emergency fund set aside. Make sure you have enough money to cover the unexpected costs that arise.
Unforeseen Home Repairs
If something breaks in your house, or you need to make repairs, you won’t want to be caught off guard. Having an emergency fund lets you plan for these types of expenses and bridge the gap between income and expenses if you don’t have a regular income. If your car breaks down, or you need to make repairs to your house, you’ll be glad to have the funds available to cover it.
Car Maintenance and Repairs
Driving a car is an essential part of modern life. A car is necessary for work, school, errands, and other important tasks. But a car is also a major financial commitment. While you may not need to have your car repaired at the moment, you may need to do so in the future. It’s wise to have some money saved up to cover these types of expenses.
Similarly, maintaining your car can get expensive. Make sure to have some money set aside for car repairs. Having an emergency fund protects you from unexpected car repair expenses and gives you peace of mind.
If something breaks on your car, you’ll be glad to know that you can pay for it without having to choose between paying your other bills and feeding your family.
Urgent Pet Care
If your pet becomes sick or is injured, you’ll need to have some money set aside to cover the cost of emergency pet care. This is a major expense and can be very expensive. Having an emergency fund helps protect you against these types of expenses and gives you peace of mind.
Family Emergencies
If one of your family members goes through a major financial setback, like a job loss or an illness, you’ll want to have some money saved up to help them out. This could be an unexpected expense like a hospital bill, or it could be something as simple as a babysitter bill.
You’ll want to have some money saved up, so you aren’t forced to choose between protecting your family and paying your own bills.
You’ll Have More For Retirement
As you begin to approach retirement age, it’s important to have some money saved up for retirement. It’s better to be safe than sorry when it comes to your retirement finances. A good rule of thumb is to have a little bit saved for retirement for every year you plan on working after you retire.
How to Build an Emergency Fund
There are a number of ways you can build up your emergency fund. One effective way is to set a savings goal and meet it each month. Another way is to open a savings account and place money away each month.
Make sure you have a dedicated place where you’ll store your money, so it won’t get misplaced or eaten by your pet. A third way is to sign up for a credit card that has a low introductory rate.
Make sure to use it exclusively for emergencies and pay it off in full each month.
Without an emergency fund, you’ll be compelled to use your credit cards, get a payday loan from InstantPaydayOH, or withdraw money from your retirement account if you experience any of the unanticipated events outlined below
You’re More Confident Financially
If you’re able to save up some money in the event of an emergency, you’ll be able to breathe a little easier. You won’t be so worried about the worst-case scenario. You’ll know that if something happens, you’ll be OK. This will leave you with more time to enjoy your life and less stressed about money.
Conclusion
Having an emergency fund will help you get through unexpected events. It will protect you from job loss and medical bills, and it will help you pay for repairs on your car or home if something breaks. It will help you pay for unexpected family expenses and help you pay for retirement. Having an emergency fund will help you protect yourself financially and make you feel more confident.
