Why You Need an Emergency Fund

When the unexpected happens, will you be financially prepared? Get savvy with your savings by planning ahead with an emergency fund.

An emergency fund provides you with 3–6 months worth of income, and every adult needs one. This fund should not account for any other savings goals you have, like saving for a house, vacation or a wedding. Instead, it prepares you for large unplanned expenses or life changes that affect your financial stability.

Despite the necessity, most American’s don’t have one because they don’t see the need.

Here are 6 big reasons why you need an emergency fund so that you can get motivated to start saving today.

1. Job Loss

We all like to think that we’ll only leave our jobs when we’re ready, but that mindset doesn’t prepare us for unexpected job loss. The reality is that no one has job security. Let that sink in. No one has job security. You never know when the economy could change, your company could go under, get acquired, change leadership, or let you go. Losing your source of income changes everything very quickly, even with severance packages. Finding a new job can be a long process, and you should be financially covered so that you can take your time finding the right position, instead of jumping into a bad job out of necessity.

2. Sudden Medical Expenses

This is a big one. Medical, and even dental emergencies can be extremely costly, even with health insurance. No matter how healthy you are, there are too many health emergencies and expenses that we can’t predict. You could get in a car accident, break a bone, fall ill, or just need a costly root canal. You or your partner could also become pregnant unexpectedly, which could greatly change your plans financially. Big changes in your health can also impact your finances two-fold if they render you unable to work. Even if you qualify for disability, it’s likely less than your current income. The bottom line is, you never want to be in a situation where you need medical care and can’t afford it.

3. Home and Car Repair

If you’re a first time homeowner, consider this your reality check. Saving for property taxes is not the only thing you need to account for. Pipes could burst, your roof or foundation could need repair, siding might need to be replaced, you never know! Car repair can be equally costly, and is especially important if you rely on your car to get to work.

4. Family Emergencies

Your finances could end up being a resource for your family members in times of crisis. Travel expenses, medical costs, funeral costs, or just taking time off work can create big waves in your bank account. Family emergencies are also particularly stressful, and when your finances suffer it can make stress even worse. Having a separate fund to pull from in times of need is one less thing to worry about.

5. Taxes and Tickets

For millennials especially, owing on taxes for the first time can come as a surprise after years of getting money back. An emergency fund keeps you afloat if you suddenly owe more than you expected. Another government related expense is traffic tickets, which can quickly add up and cost more than you might think. These are really important to pay off because left unpaid, tickets can affect your credit or result in a warrant for your arrest.

6. Life’s other surprises

The age old expression “when it rains, it pours” remains as true as ever. Minor emergencies and unexpected expenses can end up breaking the bank if they happen all at once. In the same week, you may have just paid for an expensive bridesmaid’s dress, a $700 vet bill for your dog, your wisdom teeth removal, and then have your roommate bails on rent. It could happen! Your emergency fund is there for all those weird emergencies that our normal budget doesn’t account for.

When you need it the most, your emergency fund is there to get you through the tough times and the unexpected. We hope you’ll never need it, but you’ll be glad to have it when you do. The best way to save for an emergency fund is to set aside a set amount each month, that deposits directly into the account from your paycheck. That way, you can set it and forget it, not to mention it won’t feel like money you’ve lost since it never went into your checking account.

What do you think? Will an emergency fund factor into your monthly budget? Leave us a comment below, or chat with us live on Twitter @JustOnePay. To learn more about how to pay bills and save money, visit justonepay.com.