It is estimated that approximately 30 percent of Americans do not have enough money in their savings account to cover emergency expenses. One of the most important things you can do to prepare for a rainy day is to have an emergency fund with at least six months of income. Below are some of the reasons you need to have an emergency fund:
Every day, people walk into their job and receive a pink slip. If you lose your job, then you need a way to sustain yourself until you can get another one. Your emergency fund can help you pay for your bills and other expenses.
Emergency Medical Expenses
Medical care is expensive. Even if you have health insurance, it may not cover all of the expenses. In fact, if you have to have major surgery, then you may have to pay thousands of dollars out of pocket even if you have health insurance. It will be a lot easier to deal with an unexpected medical expense if you have an emergency fund.
You Have to Move
Most of us will have to move at some point. Moving can create a major financial burden. You have to find a new place to live and arrange for your things to be transported. However, your emergency fund may cover all or part of the cost of moving.
Your Car Breaks Down
Most people rely on their cars to get to where they are going. That is why if your car breaks down, then it can be a major burden. Car repairs can be expensive, but your emergency fund can prevent you from going into debt.
Someone in Your Family Passes Away
The death of a family member is not only heart-breaking, but it can also create a financial burden. If your loved one lives in a different city and state, then you will have to pay for travel arrangements. You may also be responsible for paying for some of the funeral costs. Even if your loved one had insurance, it may take months to receive any benefits from it. You can use your emergency fund to pay for the travel costs and/or funeral arrangements.
THE BOTTOM LINE
Major unexpected expenses are a fact of life. Rather than convincing yourself that a medical emergency, a major car repair, or a job loss won’t happen to you, plan for it by building a healthy emergency fund to tap into during times of need.