Saving for the future is always a good plan. But what happens when an emergency occurs and you are not prepared. It is common for people to forget to put money into an emergency fund until circumstances make having one essential. Here are some common situations where having an emergency fund may prevent financial stress and prevent you from going into debt.
- You or your spouse loses a job
A job loss can happen to anyone at anytime. Having a safety net that covers your expenses for three to six month is crucial. This will allow you to keep current on your bills while you cut back expenses and search for new employment.
- Emergency medical or dental bills
Even with health insurance, emergencies and unexpected expenses and high deductibles still occur and can put you in a financial rut if you don’t have enough
- Unexpected home or vehicle repairs
You may have homeowners or renters insurance, and vehicle warranties may cover many repairs, however they do not cover everything. Repairs are inevitable, regardless of the age of your home or vehicle. For unexpected repairs it is helpful to have a stash of cash to pay for them
- Tax-time surprises
Most people only think about taxes in April, when they are due. They eagerly plan what they will do with their refund. But sometimes you are surprised with a tax bill that is much higher than what you had anticipated. Having an emergency fund can help cover the financial shock.
- Last minute travel
This sort of travel usually entails an ailing loved one, a funeral or other family related emergency. You need to get somewhere fast on short notice. Having money saved will alleviate the need for using credit cards to pay for the trip.