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How your Emergency Fund Protects you in Difficult Situations
Having an emergency fund has many benefits. It is not the same as having a saving account.
As the name suggests, the fund is for various emergency situations that life may throw at
you. The fund will keep you covered financially and help you get through the tough time.
Even a $1000 emergency saving fund can help you with various financial emergencies. The
best things about saving for this type of fund is you can save as much as you want. There are
various ways you can add to your fund and make it bigger over the time. If you don’t get to
use it before retirement, this fund can add extra weight to your retirement savings.
Losing your job
This is the biggest and most important reasons why people have emergency saving
accounts. Losing a job can have a very adverse effect on your life. There are so many
things that depend on your monthly paycheque – rent, food, car, electricity bills and so
many other things. When you lose your job the backup fund will help you get through
the tough time. The fund will take care of your basic needs for at least six months which
is enough time for finding another job and getting your footing back in life.
Unexpected Health Emergency
Whether you had an accident, or a major surgery is needed or you are on a long medical
treatment, an emergency fund will help in this kind of situations. Health care expenses
are one of the important emergency situations that can put a serious stress on your
finances. It is important to have a backup plan for your health emergencies.
Even if you have health care policy, you will still need to pay the deductable and excess
amount that your policy doesn’t cover. You don’t want to get stuck at this stage. Your
Emergency fund will help you cover those healthcare expenses.
Major Home Repairs
Home repair work is very important. Whether your house got damaged due to natural
disasters, or accident like fire or you have something that needs repair work immediately,
your insurance will not be enough to cover the entire cost. The insurance doesn’t provide
full coverage either. You still may have to pay the deductibles and sometimes the repair
work may not qualify for the insurance coverage. This is where your emergency fund will
come to your rescue. You can pay the amount needed immediately and keep your home
in great condition.
Unexpected Tax Bill
Just because the last time you got tax refund it doesn’t mean it will happen all the time.
With so much going on in life keeping track of expenses may not be easy especially when
you are paying high interest debts. Paying tax is important and you don’t want to be on
the list defaulters. Having an emergency fund will come to your aid in situations like this.
This is one of those emergency situations that you have no control over and may need
some extra money to cover the expense.
Likewise, there are plenty of bills that can surprise you at any point – electricity bill,
phone bills, internet bills and others. This backup fund will help you pay off the bill and
stay on the safe side.
Unexpected Travelling Expenses
You never know when you may have to travel unexpectedly. Unexpected travelling may
include death in the family, an emergency situation, surprise wedding, or any other
important thing that may need compulsory travelling. You don’t want to put unnecessary
burden on your credit card or add up to your debts that you already have. An emergency
fund will provide you with the money you need to travel anywhere you have to. This will
not put any strain your other saving accounts.
Other unexpected Financial situations
There are other smaller financial expenses that your emergency fund can cover like car
repair, emergency dental surgery, buying an expensive gift, minor accidents, and many
other. There are no fixed number of situations where you may need to spend money on.
For those little hiccups in your life, this emergency fund will help you get through.
How to save for an emergency fund
Saving for the emergency saving fund doesn’t have to be so serous like your retirement
savings. You can add to your fund with every little saving you can:
Save every month. Start small and gradually build up your fund
Save those loose change and cash you didn’t spend that day
Opt for DIYs gifts rather than buy it and save that money in your fund.
Sell your old things that you don’t use online and earn that extra cash
Cut back on unnecessary expenses like the number of coffee you buy in a day.
You can make them at home as well
Having an emergency fund can provide you financial back up for various unexpected
situations. With the fund, you don’t have to depend on other people. The best thing is
that you can save as little or much as you can.
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