A lot of people live their lives under the misconception that nothing bad will ever happen to them. Or at least nothing so bad that could possibly make them virtually penniless. We’re here to advise you against being one of those people. If you’ve had people suggesting you get an emergency fund before but dutifully ignored it every time, well, it might be time to reconsider your choices.
An emergency fund is a savings account where you store at least six months’ worth of income in advance so that you can have something to fall back on should you ever be in a financial crisis. You might be the most financially stable person you’ve ever known, but no one is above facing such a crisis at least once or twice in their lives. And as they say, it’s always better to be safe than sorry. Even if it’s impossible for you to imagine a scenario where you would need that sort of help, it’s always a good idea to plan ahead.
Some of the common financial troubles people face are often the most unexpected ones.
- You get the dreaded pink slip. In this economy, people get fired often. We like to believe we’re indispensable to the people we work for, but that’s foolish. If you have an emergency fund, you can dip into that while you look for other jobs with similar or even higher pay instead of having to take up whatever comes your way. Even when you’re jobless, you can live comfortably and make sure your family is able to do the same.
- You have to incur emergency health and medical expenses. You might have a great health insurance plan, but it will only take you so far. Any recurring illnesses – of the physical or mental kind – might require you to visit the hospital many times over. Moreover, ailments of a certain nature may even make it impossible for you to make it to work every day thus forcing you to lose your job. Having an emergency fund to bear the cost of medical bills in these times can literally save your life and secure your future.
- Major car troubles. You probably need your car for doing the most important things in the day – getting to and back from work, taking your kids to school, shopping for groceries and such else. Say, something happens tomorrow and your car stops working. You might need a lot of money to repair it as quickly as possible. With an emergency fund you can see to it that it gets fixed without having to settle for a loan or incurring debts.
- Emergency home improvements. There are a number of things that might go wrong with your home. Even with homeowner’s insurance, you might need some more money to see that it all gets repaired. A flooded basement, a leaking roof, and broken porch – any of these things require repairs and with an emergency fund to fall back on you can get them done without going into debt.