We all need help from time to time, and having an emergency fund set up is one of the best ways to arrange for that support. Emergency funds are important for a variety of reasons, as detailed in our guide. Here is a list of situations where an emergency fund can come in handy!
Because self-employed people do not have access to employment benefits and their income is not guaranteed, they may face financial instability. However, an emergency fund can help alleviate some of these problems. When business is slow or unexpected expenses arise, the money in the fund can be used to cover necessary costs. This way, self-employed individuals can overcome any financial issues they may encounter.
According to healthcare.gov, the average person spends over $7,500 on treatments for a mere fracture. For most people, this unexpected expense would be difficult - if not impossible - to afford without an emergency fund. This backup money will help you and your family deal with any medical emergencies without taking out loans that could further damage your finances.
Being prepared for any emergency is crucial. When you have a single source of income, there is no guarantee that it will last or that the income will be substantial at all times. Therefore, setting up an emergency fund can help you in times of sudden unemployment and when your current income from a job is not enough. So take advantage of this opportunity and try to set up an emergency fund whenever possible!
While owning assets like a house or car may be stimulating, they often come with unanticipated but necessary repairs, such as fixing windows or servicing an AC unit. And if your income can't handle these types of sudden expenses, it can create added stress.
In addition, for your car, you might need to buy a new set of tires or fix the sound system. Even though it is an inconvenience, having an emergency fund will help cover these costs by using the money you saved specifically for emergencies. This method eliminates any unnecessary financial stressors.
Paying off debt is a tough process, and budgeting can be even harder. Many people don't account for sudden or unexpected expenses when they're trying to pay someone back, which can create problems down the road. Having an emergency fund is a great way to avoid this issue altogether; you can use your income as planned and cover any additional expenses with the money in your savings account. This not only alleviates stress but also allows you to focus on more pressing tasks, like getting out of debt.
Budgeting is essential for financial responsibility, but it can be stressful. When done correctly, budgeting can reduce stress significantly. However, beginners may accidentally leave out expenses when first starting, which can cause problems when unexpected costs arise and there is no room in the budget.
Having an emergency fund is key to ensuring you can afford sporadic expenses while you adjust your budget going forward. Thus, these funds act as a cushion while you get used to your new budgeting routine! So, why are they important? Well, they could literally save your life one day!
