7 Reasons Why You MUST Have an Emergency Fund
Why do you need an emergency fund? Well consider this- life is going great! You are living the dream, you are able to pay all of your bills on time, and you still have a little money left over to buy that cute dress you’ve been coveting. Then your AC breaks during the hottest week of the year and needs a complete replacement. Sound familiar?
Sure, it does, we have ALL been there at some point in our lives. Most Americans are not adequately financially prepared for life’s little mishaps. In fact, near 28% US adults have no emergency savings fund.
Let’s take a look at 7 reasons why you absolutely must have an emergency fund set up.
1. Loss of Work
This is, of course, the first thing that comes to mind, particularly with all the news lately about the potential oncoming recession. With the eb and flow of the economy, you just never know if your job – despite how badass you are at it – may be in jeopardy. Whether you are laid off, need to take some time off to deal with personal matters, or are forced to quit due to the working environment/conditions, there is a very real chance you or your spouse will have to deal with this during your career. I can say from personal experience when my husband lost his job with little or no warning this year, it was a real blow to the face. Without an emergency fund, it would have made the already difficult storm even harder to weather.
2. Housing Emergencies
When you own a home, there is always SOMETHING that needs to be done. But, not only “fun” improvements, many times, expenses pop up when you are least expecting them (and least prepared for them!). And somehow it seems that everything breaks at the same time. When my husband and I first got married we had a basement flood, sewer back up (EW), electrical repair, a hot water heater busted and a new kitchen - OUCH.
Unless you are invincible, there will likely be a time where illness or injury strikes. This is a double whammy because not only does being injured or sick impact your ability to work, but it is also super expensive. In the United States, a simple trip to the ER can set you back thousands of dollars. Even Superman succumbs to kryptonite, be prepared! This is one of the most important reasons to have an emergency fund because this is one of the most common reasons a person’s finances get off track.
4. Needs of Loved Ones
Unfortunately, life is unpredictable and sometimes our loved ones may fall ill. You may have aging parents who need your assistance recovering from surgery or a heart attack, or grandparents that simply need extra care. Sometimes, these needs are so dire that they have no one else they can turn to – either financially or for support. So whether it be that you have an emergency fund so you can take a leave from work or if you are financially helping this loved one through a difficult time, it is important to have that financial security so you can not only help yourself but also help someone else
Speaking of loved ones, children are really expensive. They start being expensive when they come out of the womb, but it just doesn’t stop. Between diapers, formula, food, day care, activities, college savings - the list is endless. We want to be able to provide for our kids to the best of our abilities, so ensuring you have an emergency fund or a “kid fund” is important so you can enjoy these days and not worry about how to pay for it.
As depressing as it may be, with life there is death. It can be an expected illness, an accident or sudden incident. Regardless, you want to make sure that you have adequate finances if, Lord forbid, you have to deal with the death of a loved one. I saw this firsthand when my father passed away suddenly and my mother, a stay at home mom, had to now juggle everything. Thankfully she got through it because my father had prepared for it. I do not know what she would have done had they not had an emergency plan. So, while depressing, you will want to have enough set aside in some type of account, so when confronted with these moments, finances should be the last of these worries.
Emergency funds are only to help you get out of bad situations, sometimes you want to have your pennies stashed away for when you have an opportunity you do not want to pass on. We need to make sure that we are in the position to seize any opportunities that come our way. This may be a new business venture or a great job which may require relocation expenses. Never let lack of financial resources get in the way of fully realizing your awesomeness. An emergency fund allows you the security to take advantage of opportunities that may come your way.
Having an emergency fund affords you infinite freedom and security to deal with the game of life. Stay tuned for my next post where I talk about how to get there.