Most likely, you have faced some challenges or events in your life that you consider emergencies. These are situations that catch you off-guard and have some financial ramifications. An emergency can be something significant, such as a health issue or something minor like your furnace breaking down. Unfortunately, no one can predict these events. The only thing you can do is to prepare for them. That’s why expert Brad Kern suggests opening an emergency fund to deal with the financial consequences that accompany emergencies. Take a look at some of the reasons for opening an emergency fund account.
You Can Lose Your Job
People lose their jobs unexpectedly all the time. And when this happens, yet you only have one source of income, you’ll have no way of meeting your basic needs. An emergency fund will provide you with the cash you need for utilities as you try to figure out the next step. This is especially important if you’re the only source of income in your home. You’ll be less stressed because you know you can meet the family’s needs, even if it’s just for a few months.
Medical Bills Are Expensive
One moment you’re young and healthy, and the next minute, you’re in a hospital facing a substantial medical bill. Unexpected illnesses and car accidents can be the beginning of financial distress. Whether it’s you, your spouse, or your child, being in the hospital comes with financial baggage. And even if you have insurance, most of the time, it only covers parts of the bill. An emergency fund ensures you have a way to pay medical bills should they arise.
Emergency Funds Can Cover Home Repairs and Renovations
You’re enjoying a movie night with your friends and family when suddenly your toilets start overflowing. Besides ruining your plans, fixing a plumbing emergency isn’t cheap. This is another reason why you need to set an emergency fund. It will cover those unforeseen yet necessary home repairs. These funds can also cover affordable home renovation projects if you want to give your home a new look. This ensures you don’t have to take a loan or max out your credit card.
It Can Help You Avoid Debt
When faced with a financial emergency, the go-to solution is taking a loan. But you have to pay this loan eventually, and with interest. An emergency fund prevents you from adding to your debt anytime you face a financial bump. Whether it’s medical expenses or home and car repairs, the funds will cover such expenses. This becomes easier to manage your debt, especially if you’re already paying a mortgage or student and car loan.
It Can Cover Pet Medical Issues
Pets are also family members who need care. They need medical attention when sick, and this can be expensive. If your tiny friend falls sick unexpectedly, an emergency fund can cover the resulting medical expenses, protecting your finances.
With the high cost of living, it may feel like it’s impossible to have an emergency fund. But even saving some cash will help you in the long run.