There have recently been some unexpected circumstances in my extended family that make me once again realize the importance of an emergency fund and also make me want to at least double the amount I currently have saved.
It’s really unfortunate that over half of American’s have less than $1,000 in their bank accounts and aren’t prepared for the bad things that happen in life. Because they do happen.
While this list definitely is not exhaustive by any sense of the imagination here are some reasons you need to have an emergency fund if you don’t already have one.
You Lose Your Job
One of the most touted reasons for having an emergency fund is to tide a person over in case of a job loss.
Depending on the stability of your job and whether or not you have a significant other who earns will help determine how much money you need to have saved for this type of emergency. While most financial experts recommend that you keep 3-6 months’ worth of expenses I feel better having six months or more saved.
A slightly less expensive need for an emergency fund is repairs. What happens if your car breaks down, your washing machine quits working or your roof starts leaking? You’re going to need a fix it.
If you don’t have an emergency fund you’ll unfortunately have to rely on debt (assuming you can get a loan) to pay for these minor inconveniences.
You Need to Take Off Work to Care for a Family Member
What happens if you have a sick parent or child who needs you to take care of them? Are you going to be able to stop working long enough to help out?
This is reason touches me the most. I would never want to feel stuck to a job when someone else, who I love, is in need. And there are only a few solutions to this problem. First you can quit working with no money saved up and have to rely on debt to get you through (if that’s even an option.) The other choices are to save up both ample vacation time in case of an emergency like this and build cash savings to tide you over.
So You Don’t Have to Rely on Debt
If you have an emergency and you don’t have savings chances are you’re going to turn to some form of debt. While debt might be able to get you through the emergency you’ll then be stuck paying all that money back at a high cost and further delaying your ability to save.
So please, don’t wait until something bad happens to start thinking of saving. Set a goal and start now. This way you’ll be prepared if an emergency strikes and will have a better sense of overall financial stability.