An emergency fund is a key component in maintaining your financial health. The only thing certain about life is that it is uncertain. Think of that emergency fund — stuffed with enough savings to cover three-to-six months of expenses — as your security blanket. When life throws you a curveball, you will have the funds to calmly wait for the next pitch. Here are some other reasons why you need an emergency fund.
You Can Avoid Charging Your Credit Card
Let’s say you lose your job. Your emergency account will allow you to replace that missing income while you search for new employment. This account will also prevent a common pitfall: Using a credit card to cover for lost income. If you use a card to cover charges during your unemployment, you risk racking up bills that you can’t pay… Because you don’t have a job. Don’t fall into that vicious cycle. Instead, use your emergency fund and avoid dealing with sky high credit card bills down the road.
You Can Deal With Unexpected Expenses
Another benefit of the emergency fund is that you can easily deal with unexpected expenses. Sometimes your dishwasher breaks. Sometimes your roof leaks. Sometimes your car fails inspection. These unexpected events aren’t as difficult when you have an emergency fund to cover them.
You Can Remain Calm
The best part about having an emergency fund is that it provides you with a sense of calm. As US News reports, having an emergency fund means those unexpected financial rough waters get reduced to smooth sailing. You don’t have to worry about the unknown, because you knew enough to fund that account.