Any financial expert will tell you that one of the most important steps to achieving financial security is having an emergency fund put aside. An emergency fund is so much more than a way to provide peace of mind. In truth, it can provide safety and comfort— without you needing to rely on your credit cards. So what are the most common scenarios that would call for needing to use an emergency fund? Here are some reasons that just might convince you you need one.
Home Repairs
Home repairs are some of the most common reasons why people need to dip into their emergency savings fund. You never know when you might need to replace your furnace, fix your roof, or even require something simple like fixing a leaky faucet. Unfortunately, rarely do home repairs come cheap. It’s good to have a few thousand set aside for any type of repairs you may need to make.
Because even though owning a home comes with a certain amount of freedom, it also comes with a lot of responsibility. You don’t have a landlord to call when things get broken. You have to fix it yourself!
Job Loss
In today’s economy, you just never know what can happen. One minute you may feel like your job is going great, and the next minute you may be totally replaceable. Many people find themselves without a job when they least expect it. Unfortunately, this can come as a pretty big shock if you don’t have any sort of emergency savings to rely on. Finding yourself quite suddenly and abruptly without a regular paycheck can be terrifying— particularly if you have credit cards to pay off, and a family to look after. An emergency fund ensures that you can look after yourself for a few months while you look for another job.
Less Stress
Life is a gamble. The truth is that you never know what can happen. Sometimes the very thought of all the potential things that could go wrong can keep us up at night. Having an emergency fund means you’ll have one less thing to stress about. After all, having the peace of mind of knowing that you can cover your basic needs from house repairs to your rent is incredibly valuable. You don’t have to go through life fearing that you could lose everything suddenly. You know you’re covered even in the worst of circumstances.
No Interest
Many people rely on their credit cards to get them through tough times, as it seems like the most logical solution. However, credit cards come with a high price tag attached. Interest can start to add up significantly over time, and can be extremely difficult to get out from under if you let it get past a certain point. Having an emergency fund means you can rely on this money without a hefty amount of interest attached.
By having a dedicated savings account only for emergencies, you can avoid having to pay extremely high interest rates if you had used a credit card.
