Everyone would love to have some extra money lying around, but for some of us, the paycheck to paycheck lifestyle is reality. This usually means there’s no emergency fund or savings account, and that can often put you in a difficult situation when an emergency happens. Besides just having the money to pay for an emergency, there are other benefits of having an emergency fund that you should consider, and then use this information as a reason to do what you can to get an emergency fund started.
If you’re a homeowner, there will come a time when you will likely need to pay for a repair on your home. Having an emergency fund will allow you to cover the cost of this repair without having to put yourself into a poor financial situation to do so. For instance, whether you need to pay for a new roof, new furnace, or if there’s something else in your home that needs fixing, you’ll be able to get it done to ensure your home is in proper working condition.
Your vehicle is extremely important to you, and if something goes wrong with your car, having it fixed will allow you to keep your vehicle working so you can get to and from work, school, and other important engagements. With an emergency fund, you’ll be able to cover the cost of any type of vehicle emergency, from the cost of an airbag replacement to the cost of a new transmission. After all, fixing a vehicle is often less expensive than having to buy a new one, so an emergency fund can keep you from having to pay even more.
Even if you and your family members seem healthy, there’s always a chance that something could happen that requires a lot of medical attention. If this occurs, you could find yourself facing huge medical bills, especially if you don’t have health insurance. While you can likely work with the doctor’s office to help manage the cost of the care, it’s still nice to have an emergency fund that will allow you to pay for this. By paying for your medical needs, you’ll keep medical bills from going into collections and having a negative impact on your credit.
While an emergency fund shouldn’t be used to fund your vacation, there may come a time when you need to travel unexpectedly, such as for the birth and/or death of a loved one. An emergency fund will allow you to cover the cost of that unexpected travel, whether you’re traveling by vehicle or by plane.
No matter how secure you feel in your job, there’s always the possibility of reorganization that could put you out of a job. If you’re dependent on your paycheck and you suddenly stop receiving one, it will have a major impact on your overall well-being. However, if you have an emergency fund, you’ll be able to rely on that money to cover your necessary bills until you find a new job. Hopefully you’re able to find a job quickly, but should you be out of work for a while, that emergency fund will be a lifesaver.
Starting a Fund
Your emergency fund can contain as much money as you’d like it to. Some people claim that having $1,000 is all you need to cover the cost of unexpected expenses, while others say you should have at least a few months’ worth of your annual take-home pay. Obviously, the amount you have in your emergency fund will be up to you, and you can always start small and continue to add money as you can.
If you want to start an emergency fund, you need to find some money to save. If you can afford to put some money from every paycheck away into the fund, then go ahead and do that. However, if money is tight, you’ll want to find ways to earn some extra cash for your emergency fund, such as by taking on a part-time job or selling some of your belongings.
If you’re afraid of spending your emergency fund on something that’s not an emergency, consider having your emergency fund in another bank and don’t get a debit card for that account. This way, you won’t have an easy way to access the money, and it will be better for you to ensure you have this emergency fund somewhere when you need it.