Three reasons why you should have emergency savings
It can be difficult to justify setting aside hard-earned money each month "just in case" something happens, but it is absolutely crucial to have emergency savings. You should aim to save enough to cover your living expenses for at least 6 months in case of an unplanned event like a job loss or a medical emergency.
One of the main reasons why you should have an emergency fund is to avoid going into debt for a cost you just can't avoid. Setting aside a small amount each month ensures that sudden costs won't put you in a tough financial situation that will stress your cash flow. An easy way to begin is to arrange to automatically transfer a fixed sum of money into an "emergency" savings account for you every month.
Here are three practical reasons why having emergency savings is a smart move:
1. Fixed expenses
Remember to account for fixed expenses like utility bills, rent, insurance, groceries, and transportation. These expenses don't disappear when you're facing financial difficulties. Having emergency savings enables you to cover these fixed expenses until you get back on your feet. Calculating the total amount you spend on fixed expenses each month is important to determine how much you should have in your emergency savings account. If you're married or living with a partner, calculate these costs together as they affect both of you.
2. Medical issues
Medical issues can arise without notice, leaving you little time to prepare financially. Even with comprehensive medical coverage, you will likely still have to pay out of pocket for many expenses, such as hospital stays, surgeries, specific medications, or physical therapy. Having an emergency fund will help cover these out-of-pocket costs, ensuring that you don't have to compromise your health and well-being in order to pay for necessities like rent.
3. Car maintenance
If your car is your primary mode of transportation, a breakdown can be a major issue. It can hinder your ability to get to work, take care of your family, and stay safe while driving. Additionally, car repairs or replacement costs and the need to pay for a tow truck can be a significant financial burden, especially when you're low on funds. Building up emergency savings can help you avoid these stressful situations.
Peace of Mind
An emergency fund is essential for covering regular and unexpected expenses, such as medical bills, car repairs, and home maintenance. And, if you were to lose your job, an emergency fund could provide a financial cushion while you search for new employment. By having an emergency fund, you can have peace of mind, knowing that you have a financial safety net for unexpected financial challenges.
A small loan can also be helpful in an emergency. If you need quick access to extra funds, consider our cash loans up to $5,000. Once approved, we can usually deposit the money into your bank account within a few hours - so you can avoid stressing over those unplanned bills!