When things are finally starting to look up, the last thing we want to consider is the possibility of everything coming crashing down again. Unfortunately, life is full of unexpected twists and turns and more often than not, these unexpected events usually cost us financially.
This is why having an emergency fund is crucial. If you or your family suddenly experience financial hardship, then an emergency fund could be the only thing standing between you and homelessness, being able to pay your bills or being able to put food on the table.
So, why should everyone have an emergency fund? Here we’ll look at some excellent reasons.
It can help pay off your debts
Debt can leave a serious black cloud over your future, and if you’re already in debt and then something serious happens, like your freezer breaks or your car is no longer road worthy, then an emergency fund can provide some much needed financial relief. Sudden car repairs, unexpected vet bills or time off work can be covered, and it’ll stop you from falling into more debt. If you’re already struggling with debt and need advice, check out the Creditfix website for more details.
You lose your job
These days few jobs come with security. Which means being made redundant or simply being let go is likely. And if you suddenly lose your job, how can you afford to support your family until you find work again? You may wish to apply for benefits, however, there could be weeks between your final work payment and your first benefit instalment. An emergency fund can help bridge the gap and provide some stability during this difficult time.
Much like the job market has its uncertainties, so does the work of the self-employed. Whether you're a freelance writer, plasterer or you work from home as a cake baker, if business is slow then you could be wondering how you're going to pay your bills and provide for your family. Of course, keeping track of outstanding invoices will help keep your business funds coming in, however, it makes sense to save some of your salary into an emergency fund, so you're covered for the quieter times of the year.
Owning your own home is a life-changing achievement. However, it also means that any unexpected repairs or damage to your property must be fixed and paid for by you, rather than a landlord. A flooded kitchen, faulty electrics, issues with your drains or your heating in the winter…home issues can happen at any time and having an emergency fund to dip into to cover these unexpected expenses can help keep you financially afloat.
And finally, you have a saving goal
Maybe you’re saving for a house? Or the holiday of a lifetime? If you set up a separate emergency account, then you’ll be able to pay for any unexpected financial costs with your emergency fund rather than your other savings.