Top Reasons You Need an Emergency Savings Fund
There are several reasons why you should have an emergency savings fund. The main idea behind such emergency funds is to save at least 3 to 6 months of your net pay so that you can easily meet all your essential requirements, whenever any unforeseen events arise. However, saving that much cash can seem to be tough for some of you, but it is definitely worth the effort. Having any sort of savings in hand is a good thing, but those who have set aside money for several months of expenses are definitely in a better position. So, let us know more about some of the top reasons for which you should have an emergency savings fund.
Medical emergencies are unpredictable. One can get sick at any time. The first thing that you will do when you feel sick is visit a doctor or a hospital. Not all health insurance plans are comprehensive and certain bills and medical costs or consultation charges may totally depend on you. It will be easy for you take care of such expenses only if you have an emergency fund set aside. Usually, surgical operation costs a lot which might not be possible to cover by your existing health insurance plan. Having an emergency savings fund can be handy when it comes to taking care of such medical bills and charges that your health insurance policy does not cover.
You never know when you may lose your job. Whether you have been laid off or resigned to seek better opportunities, having an emergency fund will help you fulfil your basic needs such as food and rent, while you are still looking for a new steady source of income. So, it will be better if you keep saving when you are still getting a regular pay check. You should at least save enough to cover 3 to 6 months worth of living expenses. As you cannot predict how long the unemployment duration will last, having a larger reserve will be a smart decision.
You never know when due to bad weather or natural disaster or destructive vermin such as termites, your home may face unexpected damage. A roof leak or a flooded basement can cause water to seep into the walls and cause paint cracks and swells. Such unexpected damages are usually not budgeted for. So, the best way to cover them is to have some extra money set aside. You may have insurances to cover such major expenses, but if the deductibles are high then such insurance policy might not be that helpful. Besides, insurance generally does not pay for every sort of repairing cost. Though budgeting is recommend for home maintenance and repairs, having an emergency fund can be of great help in case any unexpected event happens.
Same like your home, your car can develop technical problems without any warning. Even if you may have recently taken it to the garage for check up, any sort of inconvenience could arise at any time. Since your car could be the only means of transportation for you and your family, keeping it in good condition and getting it to run as soon as possible is important. Having an emergency fund can make it easy for you to take care of the repairing work done immediately without ever going into debt. If your car breaks down in a remote location while you are on a road trip, where credit cards are not accepted, carrying the hard cash from your savings is a good option. You can use the emergency fund to supplement the repair costs. Similar to home repair and maintenance, it is recommend that you budget regularly for unplanned vehicle maintenance. But, occasionally accidents can happen or things might just break down out of nowhere and in such case an emergency fund can help out immensely.
Unexpected Insurance Premiums Or Tax Adjustments
Government has the power to increase taxation on certain assets at any time. Therefore, it is important that you have enough cash in hand to cover the extra costs to ensure your business keeps running and your property is never put up for auction.