March 19

10 Reasons You Need an Emergency Fund


No matter how financially prepared you are, life has a way of throwing curveballs that you never expect. Those “unexpected expenses” are the reason many financial professionals suggest having an Emergency Fund tucked away.

Even if you can’t imagine a scenario where you would need rescuing, remember, anything can happen. Here, for example, are ten situations where you might need an emergency fund.
There may even be moments where several of these happen to you at once.

  • You are Trying to Pay Off Debt — Your emergency fund can help you stop adding to your debt with every financial bump in the road. Use your emergency fund to handle stressful events and make it easier for you to stay focused on getting out of debt.
  • You Lose Your Job and Can’t Quickly Find Another One at the Same Level of Pay — With an adequate emergency fund tucked away, you could live off of your saving while searching for the perfect position. Without an emergency fund, you could be forced to take the first job that comes along.
  • You Find Yourself with a Debilitating Illness — If you are too sick to work, you could lose your job. If you are self-employed, it could be a while before you are back to work.
  • You Own Your Home — You will have to pay for all the unexpected repairs.
  • You Live Far Away from Family - It can be expensive to travel at the last minute for an emergency.
  • You Have Medical Issues — A severe medical condition can cause you to max out your deductible each year. An emergency fund can help you deal with these costs and make it easier to get through these times.
  • Your Identity is Stolen, locking you out of Your Credit Cards or Bank Account - It might take a while to sort it all out. In the meantime, you may not have access to your credit cards or debit card.
  • You Are Saving for a Goal — If you are working toward a goal like owning a home or starting a business, your emergency fund can stop you from dipping into those saving when unexpected expenses crop us.
  • You Just Started Budgeting — You may inadvertently leave out some of the expenses you needed to include in your budget. Your emergency fund can cover some of these expenses the first year, and then you can add those expenses into your budget as they come up.
  • A Friend or Relative in a Crisis - Even when you have been spared a crisis, you may be called upon to help a family member or friend. An emergency fund can help you stay afloat while helping someone else get back upon their feet.

In the end, saving money isn’t always easy, but it’s likely to be less painful than the alternatives.  Everyone needs to save for the unexpected.  Having something in reserve can mean the difference between weathering a short-term financial storm or going deep into debt.


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