Most of us have been there; you’re cruising along, having a great month, and then BAM! Something unexpected happens. Maybe it’s an expensive car repair or an illness that requires medical attention. Whatever the case may be, you’re stuck with a hefty bill and no way to pay it. If this sounds familiar, then you need to start thinking about an emergency fund—and fast!
An emergency fund is exactly what it sounds like; money stashed away that can be used in times of financial distress. If you’re like most people, life insurance can provide an emergency fund should the unexpected happen so your family can afford to grieve. The purpose of an emergency fund is to improve financial security by creating a safety net that can be used for unanticipated expenses, such as major home repairs or medical bills. It’s not something that should be used lightly; it’s something that should only be used when absolutely necessary. A few things to consider are 1. how long does it take to grieve? 2. if your family was without your income, how long could they financially survive the lifestyle you’ve created? and 3. how would it impact your family to have a little cushion if the unexpected were to happen?
The amount you decide to put into your emergency fund will depend on your personal situation. Generally speaking, experts recommend having at least three to six months’ worth of living expenses saved up. This might seem like a lot at first, but think about all the stress and worry it will save you in the long run if something unexpected does happen! Plus, if you start with small amounts each month and build up slowly over time, it won’t seem quite so intimidating.
Another benefit of having an emergency fund is the peace of mind it can bring during difficult times. For example, if you were laid off from work unexpectedly or found yourself unable to work due to illness or injury, those few months’ worth of living expenses could provide much-needed relief during a stressful time. The money can also be used for other large expenses such as home repairs or replacing a broken appliance—saving you from taking out costly loans or utilizing high-interest credit cards just to get by in a pinch.
All in all, having an emergency fund is one of the best ways to protect yourself financially and give yourself peace of mind knowing that if something unexpected does happen, you have a safety net in place for those rainy days (literally!) So don’t wait until disaster strikes; start setting aside money today for your very own emergency fund! After all – we want to be prepared…Just in case!