7 Reasons to Start an Emergency Fund
Well, it can be a hard sell. Spare cash can be hard to come by, and, after all, taking a vacation is a heck of a lot more fun.
Or at least a lot of us seem to think so. According to a nationwide survey conducted by LearnVest and Chase Blueprint, less than half of respondents are currently building an emergency fund.
The idea behind an emergency fund is to store at least six months of net income for the sake of “just in case.” Just in case your job goes “poof.” Just in case your car conks out.
Does that mean an “emergency” outfit for the film festival (rumor has it Jude Law will make an appearance)? That big trip your teen suddenly wants to take this summer?
We’ve written before about exactly what counts as an emergency, and one of the biggest reasons to have an emergency fund is to avoid going into debt for a cost you just can’t avoid.
In the survey, 31 percent of respondents said credit card debt was a significant impediment to reaching their financial goals, and they each had an average of $5,000 to pay off. Well, guess what? If they had an emergency fund, they wouldn’t need to get so far in the hole in the first place.
Here are the top seven reasons you need an emergency fund:
Your roof starts leaking
If you’re a homeowner, you know there are few things more ominous than watching the paint swell and crack above your head. It’s right up there with discovering a flood in the basement or setting the kitchen on fire before a particularly ambitious dinner party. First, make sure you have homeowner’s insurance. Then, if an unexpected home-related expense pops up, rest assured that your emergency fund is there.
You’ve received a pink slip
It usually isn’t as dramatic as Donald Trump proclaiming “You’re fired!” In recent years, it’s looked more like rounds of layoffs spurred by economic turmoil. Or maybe you chose to resign because your job was taking a serious toll on your mental health and you were burning out. Whatever the reason, you need a way to pay your bills until you establish another source of income — and your emergency fund should be it.
You can’t shake that cough
Robitussin isn’t cutting it anymore. You need to go to the doctor, and then maybe the doctor again and possibly even the hospital. Most health insurance plans only go so far; when it comes to hospital visits or other major medical costs, it’s likely you’ll be required to supplement your coverage (if you have it). With an emergency fund, you won’t have to choose between your well-being and your rent.
The only job you can get is 3 states away
According to our survey, 60 percent of respondents have, at some point, been unemployed and looking for a job. And when things are getting financially tight, you need to consider any suitable position that crosses your path — whether it’s where you live or in Portland. Between finding new housing, arranging to transport your things and the million other little costs that come up along the way, a move is expensive, but it can be unavoidable.
Your car makes a funny grinding noise
When your main mode of transportation is compromised, it affects your ability to get to work, to care for your family and to stay safe. As such, it needs to be fixed immediately. Or, in a worst-case scenario, replaced. Your emergency fund means you won’t have to go into debt to do so.
You need to get to the ER — Stat
Did you know that in many cases, you have to pay for some or all of an ambulance ride to the hospital? (And if you don’t have health insurance, it’s even more likely you’ll be responsible for covering the whole cost.) If you get hurt enough to spend time in a hospital or emergency room — maybe even hurt enough to need surgery and physical therapy — you can’t always rely on insurance to cover the full cost.
Someone close to you passes away
No one likes to plan ahead for mourning, but if someone you love does pass away suddenly, “I can’t afford the plane ticket” is the last thought you’ll want to have. If you have to travel to (or pay for) a funeral, burial service or any other bereavement-related expenses, your emergency fund can keep those charges off your credit card.
More from LearnVest:
- Get Your Money Under Control With Free Bootcamp
- Avoid These Top Savings Mistakes
- 5 Ways to Start an Emergency Fund
This post originally appeared on LearnVest.com on Oct. 19. It is republished here with permission from LearnVest.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.