Before you start saving for anything else, it’s essential to have an emergency fund. If you have other savings, it’s still important to have savings that are earmarked just for unexpected expenses. It means that money is there when you need it most. It also means you don’t have to spend money that you saved for something else on an emergency. It’s smart to save an emergency fund that can cover at least six months of your expenses, if not more. Here are some top reasons you’ll need one.
Unexpected Home Repairs
If you own your home, there are ALWAYS repairs needed. Minor ones can be put off but major ones just can’t. Even if you rent, there’s a certain amount of work you may be expected to do to keep everything in good condition. All kinds of repairs can come up, from emergency AC repair to plumbing problems, broken appliances (my constant fear!) or roof damage. With an emergency fund, you can take care of these problems as soon as possible because you’ll have the money available. Of course, it also helps to have insurance so that you can make a claim and get some of your money back on some repairs.
Unexpected Vehicle Repairs
I am SO feeling this one! We were able to manage without our main vehicle at the end of last year. We finally got it repaired (a major investment) only to have someone run a red light and hit me two weeks later! Of course, we have insurance but the vehicle is worth way more to us than it is to the insurance company. So whether you need to replace a car or just get it repaired, it’s never cheap and for many of us, NOT having reliable transportation just isn’t an option. Your emergency fund was made for situations like this.
Even though you might have health insurance, it doesn’t always cover all of your costs when you need medical care. You’ll often have to pay something out of pocket and it could be a lot more than you think. An emergency fund can provide the money to pay for deductibles and could help you out if you’re faced with large costs that your insurance provider won’t cover. It can even help you with legal expenses, should those arise. A flexible spending account might be helpful, too, but those are usually most helpful for expected medical expenses. Health crises are never expected and sometimes come with time off work, greatly impacting your income, as well (see below).
Emergency Pet Care
If you have a pet, you have to be prepared for illness or injury. Your pet has health problems just like you, and they can be expensive. Pet insurance is a smart idea, but you still need to have the money available to pay for emergency medical care for your pet. If you don’t have the funds available, you could find yourself having to make a difficult decision about your pet or having to try and raise the money that you need. An emergency fund can protect you and help you to care for a furry family member.
You never know when you could lose some of your income. You might have your hours cut at work, lose your job or maybe have an investment that doesn’t work out like you’d hoped. Or maybe you face an unexpected event or health crisis (see above). If some of your income is lost, you may need to find an alternative way to cover some of your expenses. An emergency fund is ideal for this. If you know you’ve saved enough to pay for six months’ expenses, you have that long to replace your income (or longer if only part of your income has been lost). And don’t forget, for those who find themselves in sudden need of funds, I ALWAYS suggest a pantry challenge!
Every family needs to have an emergency fund for survival. It’s there for you when you really need it. And while you can’t predict exactly WHAT you’ll need and WHEN, you can count on the unexpected!