If you want to take control of your finances and work towards a brighter financial future for your family, then one of the first things you need to do is build up your emergency fund. Simply put, an emergency fund is an amount of money set aside to cover any unplanned expenses life throws your way. These could be in the form of medical bills, home repairs, car trouble, or some other unexpected emergency. No matter what your situation, having an emergency fund is absolutely essential. Keeping that in mind, here are five reasons why you should build your own.
To Avoid Any Unnecessary Debt
When you’re faced with an unexpected cost and have no means of paying it, you may be forced to take out a loan, borrow money from a loved one, or pay for things using your credit card. This leaves you in debt that you may not be able to pay back any time soon. Thankfully, with an emergency fund, you have a pot of cash you can dip into if and when you need it. This way, you don’t need to put yourself in debt or risk your credit rating and financial future.
To Cover When Insurance Won’t
You may have medical, auto, and home insurance, but it’s important to remember that insurance companies want to make as much money as possible, which means may not always get the payments you need in an emergency. Because of this, it always makes sense to find out whether or not you need a personal injury attorney after an accident. When you’re insurance won’t cover you, it’s vital that you have an emergency fund to cover your expenses.
To Help You Save Up
When you’re saving towards a goal, such as starting a business or buying a house, an unexpected expense can completely ruin this dream. After all, if you have no other option, you’re going to dip into these savings, whether you want to or not. However, having an emergency fund would mean that those savings can be safe. Of course, your progress will slow while you build up your fund, but you’ll still leave your current savings intact.
To Provide Peace Of Mind
When you’re living paycheck to paycheck or only have one income to support your entire family, the thought of an unexpected expense can leave you completely stressed out, to the point where it can start to affect your physical and mental health. To avoid this, you need to make sure that you have some money aside to cover you when needed. This will provide peace of mind for you and your family, allowing you the flexibility to spend money without fear or guilt.
To Be More Financially Independent
When times are financially tough, it can be awkward and embarrassing to ask someone for help, even if the person you’re asking is a close friend or family member. Thankfully, having an emergency fund would mean that you don’t have to, as you have the cash you need to handle any unexpected expenses. This means you can be more financially independent and be proud of the fact that you don’t have to rely on other people when you’re in a crisis.
No matter your financial situation, an emergency fund is essential, so start to build yours up right away.