In life, nothing is certain and guaranteed–especially when it comes down to our finances.
Of course, no one wants to spend all their time contemplating about worst-case scenarios. But if they happen and you’re not prepared financially, the aftermath is not only stressful but can have significant financial consequences. It’s basically the essential reason for you to have an emergency fund. You may ask yourself how much emergency cash should I have at home right now?
Still not convinced? Don’t worry!
Here are the top five reasons for why you should have an emergency fund.
#1. Job loss
This is claimed to be the most common reason why you need to set up an emergency fund. Just in case you lose your job *knocks on wood* you’ll be able to make ends meet. You don’t need to worry about paying rent, utilities, and other living expenses.
With that worry off your mind, you can instead focus on finding the next job for you. If you’re financially stressed out, you might feel the pressure of accepting the first offer that comes to you, even if it’s not the best fit.
#2. Home and Appliance Repairs
It’s a rainy afternoon, and you’re enjoying the comfort your couch, and a cup of coffee gives you when suddenly, a droplet of rain touches your cheek. Oh no, the roof needs repair! Great. Not only will it ruin the cozy moment for you, but it could break your budget since roof repairs aren’t at all cheap.
Although, if you were to use your credit card to pay for those unexpected, but urgent, home repairs, you could use the emergency fund to pay off the card without interest expenses. Or if the emergency fund is enough, just pay in cash! See how an emergency fund helps?
#3. Medical and Dental Expenses
The years go by, and no, Joe, you’re not getting any younger. What can go wrong? A lot. From unpredicted illnesses to unforeseen accidents, a significant reason for an emergency fund is so that, when these things happen, you can focus on getting better than finding ways to pay for them.
Even if you have medical or dental insurance, it still doesn’t guarantee that you won’t pay for all or a part of your expenses. Aside from deductibles, there are also some procedures that are not covered, or you might’ve maxed out your coverage with non-essential healthcare for that particular year.
#4. Auto Repairs
Having a fine-tuned car is critical nowadays, especially for people who hardly have access to public transportation. If you don’t have your car, getting to work on time can be quite a challenge and a tad expensive.
Another essential reason to have an emergency fund is to cover a costly car repair or accident. Similar to your healthcare, even if your car is insured, you are still obliged to pay the deductibles in case of an accident. Common fixes like new spark plugs or new brakes can cost you hundreds of dollars.
#5. Other Unanticipated Necessary Expenses
No one can predict what may happen in the future. The best way to prepare for anything that comes is to have your emergency fund set up. Got your toilet overflowing? Dishwasher malfunctioning? Getting a last-minute visit from your relatives and need your home cleaned? Having an emergency fund can help you cover for that, including the expenses for a trusted house cleaning professional!
With your emergency fund, you can sleep soundly at night without worrying a thing. Now, who can put a price on that?