This is Why You Need an Emergency Fund
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How much do you have put away for emergency financial situations? If you are anything like the average American household it won’t be much, and this can cause a huge amount of trouble and strife for your economic stability.
Finance experts recommend that you need at least six months of your household income to ensure you are able to deal with anything that arises. And let’s be clear – there is a huge amount that can happen. In this guide, we’re going to go through all of the reasons why you need an emergency fund, and hopefully, spur you into action to create one. Let’s get started right away.
What will you do if you lose your job?
We all rely on our jobs for our incomes, but what happens if your firm was to shut down tomorrow? Realistically, it’s going to take you a few months of searching to find a new one, and if you don’t have the same amount of savings tucked away, your lifestyle will take a significant hit.
What if you get a tax audit?
It’s unlikely you will be picked at random for a tax inspection, but the truth is that they happen all the time. And if you have made the slightest mistake on your filing, you will be expected to pay it back quickly – and you might also get a fine. Having a healthy emergency fund means you can pay it straight away, avoid any interest charges, and be able to plan better for next year’s tax filing.
What if you are injured or get ill?
Accidents and illnesses can strike at any moment – and no one knows when. If you are debilitated you may not be able to work, and the likelihood is that you will be living on less than you did before. You can’t rely on insurance, either. A disability law firm can help with a claim, of course, but even then you might be waiting for some time to get the compensation you deserve. Make sure you have at least six months of your normal wage put aside, and this will help you in the interim period.
What happens if your car dies?
Most people rely on their cars to get to work these days. But here’s the thing – cars can stop working, breakdown, or be involved in a crash at any point in time. And given we all know how much those car repair bills tend to be, it’s critical that you can pay for them while retaining some financial breathing space.
What happens if you need off-cover medical treatment?
Again, we all have medical insurance – most of us, at least. But how far does that insurance cover reach? If you get an illness or injury that isn’t covered by insurance, you may need to pay for your treatment, medication and recovery. If you don’t have significant savings put aside, you could end up in serious debt as a result.
As you can see, if you don’t have an emergency fund right now, it’s vital that you start building one. It’s not as hard as it seems, and you will feel a lot more financially secure from here on in.
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