Emergency funds can be a real lifesaver. While we hope to never have to use our emergency fund, we keep one because of the many benefits it provides.
This article will go over the reasons why you should have an emergency fund too. The examples of emergency fund usages below all assume that you have or are working towards an emergency fund of three to six months worth of expenses.
Loss of employment may take you by surprise, and then what? If you don’t have an emergency fund you will be scrambling to make ends meet, and may have to take a job that you are less suited for. On the other hand if you have an emergency fund in place, you can take your time finding a job that will be a great fit. Your new job will hopefully pay you more as well.
My friend lost his job a few months ago, and because he had a sizable emergency fund in place he has been able to stretch himself and go after jobs that he never felt like he had the time to pursue in the past.
You get the unexpected call that someone close to you is sick, or is moving far away. Without an emergency fund, you are going to end up settling for a Zoom call or wishful thinking. Flights, lodging, food, rental car, etc add up really quickly and you want to be able to live your life and make the right call instead of being hamstrung by your lack of an emergency fund.
Everyone seems to dread tax season, and an unexpected tax burden can make it far worse. One of my friends and his wife recently had this happen to them. They mistakenly both had claimed each other and their child on their deductions. Once it was time to calculate their taxes, they realized their error, and ended up owing Uncle Sam thousands of dollars.
Most home maintenance is covered by insurance, right? Unfortunately not. If you find yourself needing to do most any medium to large scale maintenance you are looking at thousands and thousands of dollars. This could be needing a new A/C, new roof, or if your washer leaked and now you need to bring in a restoration company.
Whenever I take our car in for repairs, and I see the mechanic’s call waiting to be answered I get a pit in my stomach. For some reason, it never ends up being a cheap fix. Because of this we actually have a car repairs fund on top of our emergency fund. Unfortunately car repairs are pretty common and the last place you’d want to be in is being stuck without a car to drive.
The last thing you want to be worrying about when you are grieving over the loss of a loved one is how you are going to pay for travel, or even the funeral. The average funeral costs over $10,000 nowadays. That’s not a worry you or anyone else wants and it can be eased through an emergency fund.
No one expects to have an unexpected move, that’s part of the name. A new job, divorce, or your landlord selling your house out from under you could see you needing to find a new place to live and fast. If you are looking for a new place, first and last month’s rent, plus your deposit is a lot of money to come up with out of thin air.
If you have insurance or not, medical bills can stack up quickly. Going to the emergency room is going to cost you, and then don’t even start thinking about if you have to have surgery. There’s all the deductibles that you have to meet, plus all your co-pays. A procedure as commonplace as the delivery of a child can cost upwards of six thousand dollars, and that’s without complications.
You have insurance in case something happens, right? Correct. What about when you are leaving quickly and have to find lodging, food, clothes, etc for your family until you have the chance to come back to your home?
Children are amazing, don’t get me wrong. However, a surprise or even planned pregnancy can put a financial strain on your family in a hurry. Pregnancy increases doctor’s visits substantially. Not even mentioning child birth, you have all the prep work of buying a crib, diapers, clothes, toys, car seats, etc.
An emergency fund can help you weather a lot of life’s storms that come your way. It makes things easier, and can help you not go into debt over something that could have been dealt with using your emergency fund.