10 Reasons Why You Need an Emergency Fund
Are you one who tends not to have any extra cash on hand? Many people experience this, but with the current economic climate, rising prices are putting a dent in their pockets. When you have an emergency fund, you have a safety net for unexpected times, making it crucial for several reasons.
Before we dig into why you need an emergency fund, it’s important to know where to keep it.
Do NOT keep it in your checking account or a traditional savings account. You want to keep it in an online-based bank to earn the most on your money.
Best place to keep your savings to earn interest👇
🏦 If you have UNDER $5,000 in savings, switch to CIT Bank’s Platinum Savings Account with 4.50% APY
🏦 If you have OVER $5,000 in savings, switch to CIT Bank’s Platinum Savings Account with 4.85% APY
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1. Job Loss
Being let go of a job is an unsettling reality millions of Americans face. Research shows approximately 3.06 million people lost their jobs in December last year. Therefore, it’s essential to maintain an emergency fund.
Losing your job can be stressful, and take a toll on your relationships and mental health. Without a steady income, everyday expenses and bills can become overwhelming. However, an emergency fund can cover several months’ worth of living expenses.
This gives you enough breathing room to focus on finding new employment. Simultaneously, you ensure you can continue to meet essential needs like housing, food and utilities. It can be your saving grace throughout these difficult times.
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If you have UNDER $5,000 in savings, switch to CIT Bank’s Platinum Savings Account with 4.50% APY If you have OVER $5,000 in savings, switch to CIT Bank’s Platinum Savings Account with 4.85% APY2. Medical or Dental Emergencies
Health issues can arise suddenly and often come with hefty bills. Even if you have insurance, you’ll still have to pay some amount out of pocket. When you have a family, you could have multiple family members having medical bills throughout the year.
An emergency fund ensures you can meet this obligation without financial strain. You can support your family’s health needs without delay, letting your loved ones access the necessary care without added stress.
3. Home Repairs
Your home is where you find comfort and security, but unexpected repairs are sometimes requirements. For instance, your water heater could break down in winter or a pipe could burst in the middle of your house. These repairs can cost thousands of dollars, which can financially burden you and your family.
With an emergency fund, you can handle these situations without panic. This especially comes in handy when insurance doesn’t cover certain expenses or you have a high deductible. Extra money can fix the problem quickly, keeping your home safe and comfortable.
4. Emergency Vet Visits
Pet owners know their furry friends can sometimes find trouble that causes an unexpected visit to the vet. Urgent vet care can be expensive, whether it’s an accidental injury or a sudden illness. For instance, immediate surgery can cost anywhere from $2,000 to $5,000. However, an emergency fund ensures you can provide the best care for your pet.
Setting money aside ensures they receive prompt medical attention. Plus, you won’t have to make tough decisions about your pet’s health based on cost.
5. Unexpected Trip
Life can be full of surprises, especially when you need to take a last-minute trip to travel home. For instance, maybe there’s a family celebration or sudden need to care for a loved one.
Being able to travel at a moment’s notice is crucial. An emergency fund can cover unplanned travel expenses, from flight tickets to accommodation and transportation. These savings ensure you can be where people need you most without the added stress of how you’ll afford the trip.
6. Natural Disasters
The weather can be unpredictable and cause a huge amount of damage to your home. For instance, heavy rains can lead to basement flooding or a strong storm could knock a tree onto your roof. These events cause distress and bring unexpected repair costs.
If you’re well prepared financially, you can use the resources to address the damages to your home. This could cover structural repair, removing water or covering an insurance deductible. Emergency funding prepares you for natural disasters, ensuring you restore your home and life to normalcy.
7. Funeral Expenses
Dealing with the loss of a loved one is emotionally challenging. Plus, the added stress of funeral expenses can make it even more difficult. Funerals can be expensive, involving costs like the burial or cremation, a casket or urn, service fees, and more. An emergency fund can be an important crutch in these moments, covering these expenses without accruing debt.
A financial cushion like this also allows you to focus on honoring your loved one’s memory and gather with family without figuring out how to pay for the services. You gain peace of mind during one of life’s most challenging moments, ensuring you can give a respectful farewell.
Don’t forget the importance of term life insurance. Many people ignore the reality of what would happen to their loved ones if they were to die unexpectedly without the proper protection. Here are a few reasons why term life insurance is not an option but a necessity.
- Protection of your kids: A term life insurance will ensure that your kids can continue their education, buy a home, or even pay for their wedding if you pass away suddenly.
- Peace of mind: A term life insurance is an affordable way to potentially provide peace of mind to you and your family. You’ll be ensured that your loved ones will be protected if something happens to you. You’ll likely not have to worry about the future, knowing that your family will be able to continue their current standard of life.
- Debts payment: Debts can be a burden to your family when you pass away without any protection but Term life insurance can pay off all the existing debts that you leave behind. Debts such as credit cards, mortgages, and car loans can have a dramatic impact on your loved ones when you die.
- Funeral expenses: A typical funeral can cost almost $7,000 to $10,000, which might be very hard for your family to afford at a stressful time. A term life insurance will make sure your funeral expenses are covered so your family doesn’t have to worry about such costs.
- Protection of your business: If you’re using term life insurance to insure a key employee of your business or provide tax-free cash infusion, this policy can be a major asset to your business.
You can simply start protecting your family today with Ladder now.
8. Taking a Sick Leave
An emergency fund proves invaluable if you must go on sick leave and it’s unpaid. While your employer may legally be required to grant you medical leave, as well as parental leave, they are not required to offer paid leave. So if you need to take several weeks off, that means missing out on multiple paychecks.
That’s why setting aside extra money for these situations is crucial — it provides you with financial stability while you’re in recovery. You can still pay for things like rent, groceries and other bills even when your paycheck is nonexistent.
9. Auto Maintenance or Repairs
Auto maintenance and repairs are inevitable for car owners and can often come at the most inconvenient times. It could be a routine service like a tire change or an unexpected repair like a broken transmission.Either way, these costs add up, but a fund dedicated to these scenarios helps you stay on track with your budget. In turn, you keep your vehicle in working condition, and allow yourself to run errands or commute to work.
10. Increase in Bills
An increase in bills is a common financial challenge an emergency fund can help manage. Costs for utilities, rent or insurance can rise due to market changes, putting a strain on your budget.
However, your savings can help you adjust to these higher expenses without compromising your lifestyle. It provides more flexibility to cover the uptick in costs while you make necessary adjustments to your budget. As a result, you can stay ahead of your finances and have the means to adapt.
Be Prepared for the Unexpected
Creating an emergency fund is key for financial stability. The best way to start is by setting aside a small amount and gradually building your fund over time. Aim to cover several months of living expenses to ensure you’re prepared for any situation. Life is unpredictable, but having an emergency fund means you’ll be ready to face whatever comes your way.
Author bio: Cora Gold is a family finance writer and editor of women’s lifestyle magazine, Revivalist. She has been featured in publications including CafeMom and Mediabistro. Connect with Cora on LinkedIn, Twitter and Pinterest.
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