If you’ve been an adult for any length of time you know that life is full of surprises, some good and some, well, not so good. Some of the “not so good” surprises include major car repairs, unforeseen illnesses and getting laid off from the job, all of which can catch you completely off-guard and leave you financially strapped.
When that happens, one of the best things that you can possibly have to help you is an Emergency Fund of cash set up to fix those repairs, pay those bills or see you through until you get your next job.
The so-called “experts” in finance will tell you that having an emergency fund of 3 months’ worth of money is a good idea, but frankly having 6 months or even 12 months’ worth of cash put aside “just in case” is much better. That means if you make $2000 a month after taxes, you need at least $6000 in your emergency fund to cover you for three months, $12,000 to cover you for six months or $24,000 to cover you for a full year. Is that a lot of money for many people? Yes. Will it save your behind if you have a financial emergency? Undoubtedly!
So what kind of emergencies are we talking about here? Let’s take a look, shall we.
First there is the loss of your job. Whether you’ve been laid off, fired or need to leave for personal reasons, your emergency fund will provide a much-needed “safety net” to help get you through until you get started working again.
Then there’s the dreaded medical emergency. The fact is, even if you already have health insurance it doesn’t cover all of the costs of care, especially if an ambulance ride is necessary or things like major surgery and physical therapy are needed. Also, don’t forget about your pets needing emergency medical help, something that can be just as costly, and just as big as a financial shocker.
If you suddenly have to move because you’re being kicked out of your apartment, your boss needs you in another state or for some other unforeseen reason, having an emergency fund will help to pay for moving expenses which, frankly, can be quite high. Not only that but if you need temporary housing, new furniture or need to put your things in storage for a few weeks or even months, having your emergency fund to pay for those extra costs will be a godsend.
Don’t even get us started about unexpected car repairs, which always seem to come at the very worst time. An engine blows, a timing belt goes or something else that costs hundreds, or even thousands of dollars, and insurance doesn’t pay for those things now, does it? Even worse, if you’re stuck having to purchase a new car entirely, having that emergency fund will at least take some of the sting out of your situation.
Speaking of repairs, let’s say that your refrigerator suddenly conks out, your washing machine goes on the fritz or a wind storm blows off half your roof. Sure, you might have homeowners insurance but if your deductible is really high you’re going to be left paying a lot of those repairs out-of-pocket. If you do, you’ll be glad to have the emergency fund handy to help out.
Then of course there is the last one on our list, unexpected travel. If your dear grandmother passes and she lives in California but you live in New York, going to her funeral is going to cost a pretty penny. The same thing can be said for any emergency travel that you need to make and, if your emergency fund is well-stocked, at least you’ll have the extra cash to cover the expenses.
The bottom line, dear readers, is simply this; having an emergency fund is basically “saving for a rainy day”. Since you really never know when it’s going to rain, or when a sudden financial expense is going to pop up, having that emergency fund handy and full of easy to access cash may very well be the only lifesaver you’ve got.
So do yourselves a favor and, even if it’s only 50 or $60 a week, start putting money aside into the emergency fund today. The fact is, you never know what tomorrow’s going to bring.