When you are in debt, the last thing you want is to think of opening an emergency fund. An emergency fund just sits there, but it is, in fact, very important.
Here’s why you need to have an emergency fund.
You lose your job
Losing your job can hurt, especially if you have a family dependent on your income. When you lose your job, you are going to take time for to find a new one. It’s worse if the economy tanks and unemployment is high, which means that job opportunities are scarce and professionals are not.
How do you survive during that time? You depend on the emergency fund you stashed away.
Sudden Medical Expense
A sudden medical expense can come in any form like you fall ill or have an accident. Most medical insurances cover the most basic things, however, beyond that, you will have to find money to get by on your own. Medical expenses often include bulk spending for operations and medical drugs. Add to that, you will also need a recovery time period before you can join the workforce again.
Home Repair
It can be a pain to realize that you have to spend a bomb for a sudden home expense, but it can happen. Issues like a cracked roof or a new heater need your immediate attention and expense. It will be worse if you have a leak problem that is destroying the structural integrity of your home.
Emergency home repairs are costly, and to ignore them because you didn’t have the money would be foolish as it would lead to more costs.
Lending Help
We are all surrounded by family and friends. At any point, a friend or family member may require financial help. Having an emergency fund allows you to lend a hand in their time of need. It may be a dire medical emergency or an accident for which they require your help.
Unanticipated Costs
To quote John Lenin, “Life is what happens to you when you are busy making other plans.”
An unanticipated and large expense can hit your life any time. The emergency could be with
your home, health, car, or within the family – it could be anything.
Having an emergency fund is something that you can fall back on. In a way, you are ready for whatever life throws at you, financially at least.
You should have at least six months of salary stored as an emergency fund. This will give you a sufficient amount of financial leeway if and when the emergency happens.
Don’t have a ‘never will happen to me’ attitude, because it will not happen to you, until it does.
