6 Reasons You Need to Start an Emergency Fund Today

Life Insurance

Everybody needs to start putting money into an emergency fund. You’ve probably heard it a thousand times but haven’t done anything about it. It’s one of those things that youb’ll get around to at some point, but right now it doesn’t seem that urgent. The reason that people put off starting an emergency fund is that they don’t realize how important it is until it’s too late. People also think that if they’ve got other savings, it’s fine. But if those savings are for retirement, you don’t want to dip into them either. All of a sudden an emergency hits and you’re thinking, if only I’d listened to that advice about starting an emergency fund I wouldn’t be in this situation. Well, you shouldn’t leave it until it’s too late because there are a lot of reasons that you need one, if you’re still not convinced, these are just some of them.

Job Loss

Nobody expects to lose their job until they do. Even if you’re great at your job and your boss loves you, that doesn’t make you immune to being made redundant. If your company hits hard times and they have to start making difficult decisions, you could end up losing your job out of the blue. Hopefully, you’ll get a good redundancy package but that won’t last forever. You never know how long it’s going to be until you can find another job and if you run out of money, you could end up borrowing money to pay your living costs which is going to put you in a financial hole that you can’t get out of until you find work again. If you’ve got a healthy emergency fund, it takes a lot of the pressure off and you don’t need to resort to credit cards to get by.

Car Accidents

If you’re in a car accident and you haven’t got insurance, you could end up paying out a lot of money. If the accident is bad enough that you have to take time off work as well, you’ll have to cover that loss of earnings. The first thing to do is consult car accident lawyers and see if you can get a settlement to cover the repairs and any loss of earnings. The thing is, you don’t know how long that process can take so you’ll need an emergency fund to keep you going until you get that money in. You can’t do without your car so you’ll have to spend the money on repairs, whether you’ve got it there or not.

Home Repairs

If you get a burst pipe or the boiler stops working, you’ll have to get it fixed right away, otherwise, the house will be unliveable. When you get somebody in at short notice to do emergency repairs, the callout fee is going to be huge and you’re at their mercy when it comes to the cost of the repairs because you can’t exactly put it off. You might end up maxing out a credit card if you haven’t got a healthy emergency fund to cover the costs. It’s also worth looking around now to find the most cost effective emergency plumbers and contractors so when you’re in a bind, you don’t end up calling the first person you find and getting ripped off.

Tax Bills

When you’re filing your tax returns, the amount that you owe can change drastically from year to year. Even if you got a refund the previous year, that doesn’t mean you won’t get a big bill this year. The tax man won’t have any sympathy for you if you tell him that you haven’t got the money to pay right now and if you’re late on your payments, you’ll end up with fines that just put you in an even worse financial position. When you’re trying to pay off that debt and you haven’t got time to save the cash, you either need to dip in to the emergency fund that you should have, or you’ll have to start borrowing to cover the cost.

Family Emergency

If one of your family members is in trouble and they need money, you want to be in a position to help them if you can. But that’s not always possible if you don’t have the money to spare. If you’ve got an emergency fund, you’ll have money there to lend them. Even if they don’t need cash, they might need somewhere to stay and that’s going to mean an increase in your bills. If they can’t afford to give you the money for it right now, you’ll need a little extra money to cover that extra cost.

Health Problems

The most common reason that people need an emergency fund is to pay for health care. Health problems can hit at any time and even if you’ve got insurance, it might not cover more serious problems. There’s no telling how long the problem could last for so if you’re borrowing to cover the bills, you might be digging yourself into a big hole. There’s also the chance that you have to take time off work due to a health problem so you’ll have to cover bills while you’re not earning anything. A healthy emergency fund is the only way to stop a serious health problem from ruining your financial situation.

Those are just some of the many reasons that you need an emergency fund and if you haven’t got one already, you should start saving right away. If you’ve already got good saving habits, it shouldn’t be too much of a problem. Say, for example, you’re putting 10 percent of your paycheck into savings every month, you should split that and start putting seven percent into your savings and 3 percent into an emergency fund. You can also build it up a little more by cutting out small unnecessary expenses and putting those savings into your emergency fund instead. However you decide to do it, don’t wait another second before you start setting up an emergency fund.

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Beth Jones is a valued contributor to various blogs.

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