At this point, you’ve probably heard it’s smart to build up an emergency fund – but do you know why it’s a valuable asset to have? We’ve listed our top 15 reasons why an emergency fund can make all the difference in a financial emergency.
No matter the reasoning behind a job loss, living paycheck to paycheck isn’t easy! An emergency fund helps ease the financial tension you’d feel while finding your next role.
What would happen if the hours and salary you count on were suddenly cut? Overstaffing could happen unexpectedly and leave you in a tough spot financially. While you look for another job or ride out the overstaffing storm, an emergency fund is the perfect income cushion.
If you rely on using your vehicle to get to work, when your car has a problem, you need to get it fixed right away. There aren’t many car repairs that cost less than a few hundred dollars. If you were to get into an accident, the insurance deductible alone could be $500 or $1,000. Instead of hoping for insurance to kick in, or worse yet a loan that you later have to pay interest on, consider utilizing your emergency fund to finance your repair.
You likely have insurance to cover the major incidents of owning a home, but if you have a high deductible, could you come up with the cash to cover it? An emergency fund will be a critical financial lifeline if your washing machine stops working or you need to get a dangerous leaning tree removed from your yard.
Even if you have health insurance, if you have a medical emergency, a surgery or need an expensive prescription, your policy’s deductible and co-payments could be hundreds or even thousands of dollars. Not to mention, you may need to miss work in the event of a true health incident. Skip the financial pain, while in physical pain, by stepping up your emergency savings now.
Many people living paycheck to paycheck don’t have dental insurance. And again, even having insurance could still cost you big as your dental insurance may not cover the cost of an emergency root canal or tooth being pulled. Even getting a few cavities filled could add up to be hundreds of dollars.
If your parents are aging or have health issues, you could find yourself with a sudden increase in financial responsibilities. You may need to chip in for their medical bills, home health care, putting in a wheelchair ramp or other special needs. Be able to support your loved ones in their time of need with the help of your savings.
You may be able to easily afford your pet’s food, toys and regular shots. But what happens if your pet needs a hip replaced or gets cancer? Especially with aging pets (or dogs that eat things they are not supposed to), emergency veterinary bills can get very costly. In addition to an affordable pet insurance, consider dedicating a segment of your emergency savings to pet-related costs.
Maybe you normally get refunds, but a change in your situation or tax laws could cause your taxes to be configured differently, leaving you with a fat tax bill. This can be a shocker, especially if you’re used to cashing a check around tax time. An emergency fund would help you handle an unexpected expense such as this.
Maybe there is a death in the family on the other side of the country or a friend or family member suffers a health crisis and you need to be there to help. Buying a last-minute plane ticket and having to take time off work is one way to surely gouge your budget. Don’t make the heart-breaking decision between caring for a loved one in their time of need or staying financially afloat with the help of a healthy emergency savings.
It’s difficult to think about, but you may be responsible for paying for funeral and burial costs if a loved one were to pass away. Many funerals cost more than $10,000. Skip the loan process during your time of grief by having an extra cushion to pull from.
From rent hikes to increased heating bills in the colder months, your cost of living could increase unexpectedly. Avoid throwing your budget completely off with a supplemental savings fund to help make ends meet until you can figure out a longer lasting solution.
While you may have a great roommate or partner to split your rent with, what happens if you need to go your separate ways and are suddenly responsible for a larger rent payment? Thanks to your emergency fund, you’d be able to make an informed next step in living arrangements instead of rushing to make ends meet.
If your company is transferring you to a new office or you need to move closer to family to take care of someone who is ill, movers, deposits, temporary housing and the cost of furnishing a new place can add up quickly.
No one likes to think about the possibility of a fire or hurricane wiping out their home, but even with insurance, replacing all your worldly belongings would be extremely expensive. Covering costs of temporary housing, travel or insurance deductibles are just a few of the costs of a natural disaster.
Now that you’re familiar with the benefits of an emergency fund, get started on building yours! Plus, did you know with Cookie Jar, you can build your emergency fund with the help of your employer? Start saving today with the help of Cookie Jar!