As clichéd as it may sound, we cannot deny the fact that life is full of surprises, both good and bad. You never know when your life takes an unexpected turn and throws you into a financial crisis or brings up unexpected expenses. You need to secure your future financially and not let tough times get the best of you.
As we have seen during this recent national crisis, many are left with no job, no savings and no way to pay for basic necessities. Having an emergency savings fund is one of the best ways to ensure financial security. Here’s why:
Emergencies Are Inevitable and Can Occur Any Time
We all have certain monthly payments that we cannot afford to not pay. These include rent or mortgage, utility bills, and insurances, to name a few. Now imagine the trouble you will get in if you lose your job while having minimal to zero savings. How will you meet these expenses? You will be left with no other option than to take a loan or give up things you are currently financing.
This is just an example. There can be several different types of emergency situations that require handsome amounts of money to deal with, such as:
- A medical emergency that isn’t covered by your insurance.
- An urgent need to travel; this is most relevant to people living away from their families.
- Unexpected home and/or vehicle repairs.
Having an emergency fund offers peace of mind. It ensures that you don’t end up spending all your energy in making ends meet or arranging for finances and can deal with actual problems.
Establishing an Emergency Fund Is the First Step of Sound Financial Planning
According to experts, establishing an emergency savings fund is the best thing people can do for themselves and their families, from a financial perspective. It helps you survive through financial crises without falling into debt trap by relying on your credit cards or, at worse, resorting to high-interest bank loans. Start building an emergency fund, if you aren’t already doing it, to better equip yourself to deal with unforeseen financial blows.
Financial experts recommend having a liquid fund equivalent to at least six months of your living expenses for emergency situations.
Our counseling helps couples and families learn how to use their money. We help teach strategies to paying bills on time, eliminating extra fees and learn how to begin saving.
Image Credits: Photo by Michael Longmire on Unsplash