Many people save money for a variety of reason. Most people have a retirement fund, ensuring that they will be financially set when they are ready to retire. Also, many parents have a college fund set up for their children. Finally, financially responsible individuals save money in an emergency fund. This fund makes it possible to cover unexpected, emergency costs without needing to dip into their retirement or their children’s college fun. Having an emergency fund will prevent the individual from racking up credit card debt to cover the emergency cost. If you have an emergency savings fund, there are several reasons that you may need to tap into it.
You Were Fired or Laid Off
If you are fired or laid off from your job, suddenly, your only source of income is gone. This is a serious problem. When you no longer have money coming in, you housing costs, utility bills, car payments, and credit card bill would all need to be put off. These are bills that cannot be put off without serious repercussions. If it takes you weeks or months to find a new job, you will be happy that you have an emergency fund that you can tap into.
Unfortunately, cars break down. Regardless of how well you take care of your car, things can go wrong. The cost of the repairs would depend on what part of the car is malfunctioning and how serious the damage is. In some cases, it would cost more to repair your car than what it is actually worth. If you have an emergency fund, you can use it to either make the necessary repairs or to purchase a new vehicle.
If you are like most people, you love your pets. Many people treat their pets the same way they do their children. If you children get sick or break a bone, you have health insurance to cover their doctor expenses. Most pet owners don’t have insurance for their pets. Also, many veterinarians don’t accept insurance. According to Vetinfo.com, you can expect to pay over $2,700 for a broken bone or a serious illness. If you don’t have the money handy, you would need to tap into your emergency fund to save your best friend.
Being Involved in an Accident
If you are involved in an accident of any kind, it can be very costly. If you don’t have the best health insurance, some of your procedures may not be covered and you would need to pay for them out of pocket. This can be very expensive. If your injuries are serious enough that you cannot work and you don’t have any type of short-term disability insurance, you would have no income until you are healed. When you have an emergency fund, you can focus on getting better without worrying about how you are going to pay the bills and put food on the table.
You can follow all of the recommended routine advice regarding the appliances in your home and something can still go wrong. New appliances can be very expensive, therefore, you may need to tap into your emergency fund. If you have a plumbing issue in your home or electrical problems, they can be very expensive. It is nice to know that you have an emergency fund set aside for repairs.
Many couples plan for months and then try for even longer to get pregnant. For other couples, pregnancy can be a surprise. If you find out that you are pregnant and you are not prepared, it can make things very stressful. Suddenly you need to worry about moving into a larger home, buying baby furniture, and making sure that you are fully stocked on diapers and formula. It is nice to know that you have an emergency fund to get you prepared for your new baby. This is a very common reason that couples tap into their emergency fund.
If you or your spouse suddenly become seriously ill, going to work may not be an option. Also, the hospital bills can build up if all of the treatments were not covered under your health insurance policy. Being sick is stressful enough, you don’t need to worry about the cost of your treatments and your lost wages. This is a very common reason that people tap into their emergency fund.
Death in the Family
When there is a death in the family, it can be one of the hardest things that you can ever go through. If you are responsible for planning and paying for your loved one’s memorial service and burial, it can be very expensive. Most people don’t have this kind of money lying around. If you aren’t responsible for paying for the memorial services, you may need to travel to attend the memorial. This would mean that you need to pay for airfare, a hotel, and meals. Your emergency fund can really help in such a situation.
Most people need to have a cell phone and a laptop for work and to conduct their personal business. If you break or lose your phone or if your laptop no longer works, they would need to be replaced. This can be very expensive. According to Consumer Reports, a new laptop can cost you up to $3,300. A replacement cell phone can cost up to $500. Most people don’t have this kind of money lying around, and they would need to tap into their emergency fund to pay for the replacements.
You Fell Behind on Bills
It is not uncommon for a person to make a financial mistake or two, which can result in unpaid bills. If your utilities are in danger of being shut off or if you are several payments behind on your mortgage, you can find yourself in serious trouble. When this happens, it is nice to have an emergency fund to bail you out of your financial problems.
If you need to tap into your emergency fund, it doesn’t mean that you are a financial failure. It simply means that unexpected problems have come up, and you need some extra cash. Because there are so many emergencies that require money, you should have an emergency fund in place.