Saving money is a good goal to have, especially when the world is reeling from the COVID-19 crisis. But beyond that, making sure you have adequate funding set aside for an emergency fund should always be a financial priority. Whether you’ve been putting it off or you’re just getting started, here are a few good reasons why your emergency fund should be your top financial priority.
Replacing Lost Income From Your Job
There are countless reasons why you could be out of work. Maybe you’re in a waiting period between leaving your last job and starting your next one. You might be in the start-up phases of your own business without any supplemental income. Or maybe you’ve just had surgery and you’re on temporary disability leave. And while something like temporary disability does entitle you to two-thirds of your normal income, sometimes it’s just not enough. Having an emergency fund in place ensures that you have enough money to pay for your regular expenses and maybe a little extra during the period when you may not be working. It’s easy enough to tell yourself you’ll be fine with just a credit card, but what happens when your bill is due? Having your emergency fund as a backup to replace some of your steady income is crucial in these situations.
Paying Out-of-Network Medical Expenses
As painful as it can be, sometimes it’s necessary to go out-of-network for certain medical services. When 25,000 Americans suffer from ankle sprains on any given day, not all of them are going to get injured in their backyards. Whether you’re in an unfamiliar place or you need a specialist whose services aren’t covered by your insurance, the bill is going to make its way to your door all the same. In the event that you do need to go out-of-network, your emergency fund could be the saving grace that keeps you from accumulating unwanted medical debt. While it’s always a good idea to see what kind of repayment options the billing hospital provides, having that emergency fund at the ready can provide some much-needed peace of mind.
Covering Unexpected Home Repairs
As far as unforeseen expenses, home damages are pretty frequently included. Natural disasters like hurricanes, tornadoes, earthquakes, and floods can wreak havoc on your home in the blink of an eye. Next thing you know, you’re paying for a new roof and refinishing your waterlogged basement. While home insurance can usually cover the bulk of these repairs, an emergency fund provides some extra peace of mind. And in the event that your insurance won’t cover a portion of the repair costs, that same fund can help you make ends meet without draining your checking account. Now your new roof will be a relief instead of a source of unnecessary stress for you.
Saving for Retirement
Of course, if there aren’t any emergencies for you to use your funds on, it’s a good nest egg to help you save up for retirement. You’ll be able to cover expenses for things like housing and health insurance, which may have previously been provided by your employer. And considering the median loss for health care fraud was over $1 million in 2017 alone, paying your own way can definitely have its benefits. While your emergency fund might not cover all of your retirement expenses, it’s important to start thinking about how you’re going to fund that period of your life. The sooner you can start your nest egg, the better.
Building an emergency fund can help you in so many ways. The ones we covered today are just a few of them. If you want to ensure financial stability in the face of unexpected emergencies, start your fund now.