The first rule of budgeting is that people must permanently save for a rainy day. People can get a lot of help when it comes to finding ways to become financially stable. They work on developing financial literacy and creating a strict budget that allows them to build financial stability and security. There will be a lot of challenges and changes, but there should always be a regular part of your budget where you set aside part of your income.
That situation is where an emergency savings account comes in. It is a fund you do not touch unless you have to and is there to ensure that you are covered if something unexpected arises.
The peace of mind you can get from an emergency savings account is worth its weight in gold, and it will be fun to see it grow and grow. However, the primary reason is to ensure you can survive a rainy day. Here are a few reasons why your emergency savings can save you.
Mortgage Payments
Your mortgage is one of the biggest, if not the biggest, bills you must pay each month. It ensures you get one of the most vital things in your life: your home. Unfortunately, it will take you decades of 100% savings to even secure the downpayment for a residential property. Of course, your need for shelter is immediate, so you might have to go into debt to secure your home.
Fortunately, a home purchase is an expected expense for people, making it one of the top reasons people build up a savings account. The downpayment will be your top priority, often accounting for 20% of a suitable residential property for you. It will be a massive expense, but that is why you have an emergency savings account. Fortunately, you can find a mortgage loan officer to help keep the rest of the home purchase manageable for the rest of the payment term. They will ensure you can maintain financial stability by looking for the best properties and mortgage terms for you.
There is no reason to feel guilty about taking money from your emergency fund for a home downpayment. After all, it will be one of your best investments in life and your survival.
Medical Expenses
No one wants to think about getting sick or being in an accident, but the truth is that it can happen to anyone at any time. If you do not have insurance, you might have to pay for your medical expenses out of pocket. Even if you have insurance, deductibles and other costs are still not covered. An emergency savings account can help you cover these expenses so that you do not have to go into debt or use up all your other savings.
Of course, no one likes to think about needing money for a funeral either. However, this is another reason why people keep an emergency fund. A funeral can cost several thousand dollars; most people do not have this money.
If you have ever had to pay for an unexpected medical expense, you know how important it is to have an emergency fund. No one knows when they might need it, but it is better to be safe than sorry. Most people establish their emergency fund to an amount closest to how much a surgery costs, particularly for the appendix.
Job Loss
In today’s economy, job loss is more common than ever. Even if you have a good job, there is always the possibility that you could be laid off or fired. If this happens, you will still have bills to pay and mouths to feed. An emergency savings account can help you cover your living expenses until you can find another job.
Of course, job loss is not the only reason you might need money from your emergency fund. You could also need it if you cannot work due to an injury or illness. This is why it is so important to have an emergency fund; you never know when you might need it.
No one wants to think about the possibility of job loss, but it is a reality for many people. An emergency savings account can help you cover your living expenses until you can find another job. Collecting six months’ worth of your income as the emergency fund’s basis will be best to ensure you can live comfortably while looking for another job.
Conclusion
An emergency savings account is a vital part of your financial well-being. By having an emergency fund, you can protect yourself and your family from financial ruin. The best way to start an emergency fund is to set aside a few dollars each week until you have enough to feel comfortable about these expenses when they hit you. This strategy will help you weather any storm that comes your way.
