When it comes to emergency funds, it’s better to be prepared than sorry. No matter what your financial circumstances currently are, life has a way of throwing you curve balls. And these “unexpected expenses” can really hurt your finances now and for years to come. That’s why financial experts recommend building an emergency fund right now to prepare for those financial emergencies when they come.
About one-third of Americans don’t have sufficient savings to pay for unexpected expenses, according to a survey by the Consumer Federation of American and American Savings Education Council. That means, if an emergency came up, they’d be forced to rely on credit cards, take out loans, or tap into retirement accounts.
Here are five reasons why you should consider building an emergency fund to protect yourself from those “unexpected expenses.”
1. You lose your job
This is often the primary reason for needing an emergency fund. If you lost your job and it took a few weeks or months to line up another job, would you have enough in your savings to pay for necessary expenses? If you have a decent emergency fund, you could take your time and find a new job with similar pay and benefits. If you don’t have an emergency fund, you may be forced to take the first job that comes along, whether you want it or not.
2. You or a family member has a major medical emergency
One slip and fall can result in a trip to an emergency room with a broken bone and thousands of dollars of medical bills. This could create a major financial strain on you if you don’t have health insurance or an emergency fund saved up. A medical emergency can cause enough emotional stress; you don’t need to add financial stress on top of it.
3. You only have one income
If you only have one source of income, it’s especially important to have some funds to fall back on if that source suddenly disappears. If you experience unexpected job loss or an illness that keeps you from working, you could lose your sole income and be in big trouble. Having an emergency fund will help you have something to fall back on if any unexpected curve balls are thrown your way.
4. Your car breaks down
There are so many things that can happen to your car that could leave you in a financial crisis. Your car could break down on the road and you need to pay the high expenses for a tow truck. You need to pay the mechanic hundreds of dollars to fix your car. Your car breaks down in the middle of nowhere and the only mechanic you can find won’t accept credit cards. Or your car isn’t worth the amount it will take to fix it, so you need to buy a new car. Car maintenance can really set your finances back if you’re not prepared for some type of emergency.
5. You want to be better prepared for the future
When you build an emergency fund, you are creating a parachute to protect yourself and your family from unexpected disasters. You understand what is most important in your life and are engaging in good financial behaviors to keep those values safe. When you understand the principles of good financial management, as we teach in our FinStrong education program, everything else falls into place.
Build a better future for yourself and your family by creating an emergency fund today. Head to RentPlusMoney to create a budget and find out how you can start saving a little bit each month towards your emergency fund. Start saving today for a better tomorrow.