Three reasons you should have emergency savings

It can be hard to justify setting aside hard-earned money each month “just in case” something happens, but it is absolutely crucial that you have emergency savings. The idea behind emergency savings is to store at least $1,000 for an emergency, such as being laid off at work.

One of the biggest reasons to have an emergency fund is to avoid going into debt for a cost you just can’t avoid. Setting aside a little bit every month will ensure you are not stressing your cash flow too much; otherwise, any sudden expense could cause you to slide into debt. An easy way to get started is to have your bank automatically put a set amount of money into a savings account for you each month.

Here are our three biggest reasons why having emergency savings is so important:

Fixed expenses: Fixed expenses like your utility bill, rent, insurance, groceries and transportation don’t go away just because you’ve lost your job or are in a financial bind. Having emergency savings helps you to pay these fixed expenses until you can get back on your feet. Take the time to calculate how much you’re spending on fixed expenses each month to determine how much you should have in your emergency savings account. If you're married or living with a partner, be sure to calculate these costs together as they relate to both of you.

Medical issues: Medical issues can arise without any notice, giving you no time to prepare financially. Even with top medical coverage, you’ll still likely have to pay out of pocket for many things like hospital stays, surgery, certain medications or physical therapy. Having an emergency fund will help to pay for these out of pocket expenses so you don’t have to sacrifice your health and wellbeing in order to pay rent.

Your car needs to be fixed: If your car is your main method of transportation, having it compromised can be a huge issue. It affects your ability to get to work, care for your family, and to keep yourself safe if you’re stuck driving a broken car. Worse yet, if your car breaks down and you have to pay for a tow truck and pay to get it fixed or worse, replaced. When you’re strapped for cash, this can be a huge blow and can be avoided by having emergency savings tucked away.

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