The benefits of having an emergency fund


The benefits of having an emergency fund

Jan 29, 2018, 7:20:35 AM Business

We all know that life has the tendency to fall apart when we least expect it, so it is better to be prepared and expect the unexpected. Even though there are a lot of people who do not take this into consideration, it is important to have sufficient savings in case something unanticipated happens. If, for instance, an unforeseen event takes place, you will immediately be forced to use your credit cards or take out a loan, and these options are not very good for your pocket. Why not? Well, they will probably leave you drowning in debt. So what is the best thing that you can do? It is simple. Build an emergency fund and you will be thanking yourself later.

Avoid credit card use as much as possible

Try using your credit cards only if you are in an irremediable situation and by this, you should think of things such as a car break down, a car accident, hospitalization or other serious reasons. If you do not have an extreme emergency, then you should not use your credit cards at all. Instead of using them, concentrate on paying them off. Also, if you feel the need to close down your accounts, you may at least think twice. Closing your credit card accounts would have a negative mark on your credit, so it is best to keep a good relationship with your creditors. Anyway, the best way to not use your credit cards is to build an emergency fund and if you want to know the benefits of having such a fund, then keep on reading.

Emergency fund in case of car or home repairs

The best reason for building an emergency fund is to think that you will actually save up for unanticipated financial difficulties. The first thing you need to do is choose a place which has easy access, but at the same time, choose a place that will not tempt you to take money out. An appropriate thing to do is create a separate account from your normal account, thus you will not feel the need to withdraw cash as you normally would. Moreover, in case of car or home repairs, your emergency fund will be more than welcome. As an example, if something bad happens and you need to redecorate your home, but your insurance does not cover all the expenses, the emergency fund will be the one saving you.

Major health expenses or job loss

Nobody is ever prepared to take a trip to the emergency room, but in some cases, it is mandatory to do so. Let’s say you need to get a surgery, but your health insurance does not cover all the expenses. What can come in handy? Your emergency fund, of course. And what happens if you lose your job? Well, job loss needs to be the main reason you need an emergency fund because you never know what may happen. In case you lose your job, you will have a lot of bills to pay and without a regular paycheck, things can get difficult.

Published by Cynthia Madison

Comment here...

Login / Sign up for adding comments.