From my previous post, I have already discussed what an emergency fund is. How to start saving money and some tips that will help you reach your goal in reaching your financial freedom.
Today, we will try to list down 10 important things why you need an emergency fund. Your reasons may be in one of the situations listed below.
Why You Need an Emergency Fund
1. Job Loss
During this pandemic, many people lose their job. When you have an emergency fund, you will be able to survive at least three to six months until you find another job.
Or until you obtain another source of income that will sustain your daily living.
2. Change of Job
Changing jobs need an adjustment. It may require some adjustment on the budget especially if your new income or salary is lower from your previous one.
The new job also needs some funds for a requirement like NBI clearance. Medical clearance and other documents that may be necessary by your new company.
If you have an emergency fund it can cover those expenses.
3. Pay Cut or Downsizing
Even if your company is doing great right now, unexpected things happen. One great example of this is the present situation we have when a pandemic occurs.
Many companies considered skeletal work and pay cuts to enable them to cut down their losses.
Some still consider their employees so they just remove some of their benefits so they still receive their whole salary.
Having an emergency fund can back you up during these times.
4. Business Failing
When you have a business, things will not always work out the way you wanted it to be.
The economy is changing, even so, the technology and when your business is not adapting to the sudden changes, it might fail.
The emergency fund will be your fallback for this.
5. Home or Car Repair
When you own a home or car, you have to pay for the sudden repair or maintenance that may happen or occur unexpectedly.
When you have an emergency fund, it will lessen your worries that you may need to loan.
Or use your credit card on any unexpected service for your home or car.
6. Medical Expense
May it be an accident, an emergency that needs one-time payment.
A long term medication having an emergency fund will help you afford the treatment that you need to get you better.
One of your family may get sick too. And someone has to pay the bills.
7. Death in the Family
One of the worst that will happen to you is having a death in the family. Aside from the expensive burial and ceremonies, your deceased family has not allotted a fund for his/her death.
When you have an emergency fund, you can help your family to cover some of those expenses and you can focus on your grieving process.
Even if you are single, in a relationship, or married, it does happen. Having a baby is a blessing but you must be also financially prepared for having one.
But with an emergency fund, you have a better position to prepare for your incoming bundles of joy. You have to remember that it is not just for yourself now, but for your baby too.
9. Identity Stolen
Now technology is in advancement, hackers, viruses, and scams are all over the place. When your identity is stolen, it will compromise your credit card or bank account.
They may even steal your money with just one click on any given link. You must be vigilant and careful in giving your information.
In this case, having an emergency fund can save your life.
10. Natural Disaster
A natural event like flood, earthquake, or hurricane can cause great damage or loss of life.
These things are beyond our control. There are a lot of unexpected expenses needed to survive this kind of disaster.
And having an emergency fund will help you survive.
All of these things and much more unexpected happening in your life that will cause your financial situation into chaos if you have not prepared for your emergency fund.
If you don’t have an emergency fund, I highly recommend that you start preparing and planning to have one.