Why You Need to Prepare Yourself for Financial Emergencies

Life is full of surprises and sometimes those surprises are expensive. You don’t want to get caught unawares by a pricey problem that pops up out of the blue, especially if you’re waiting for your next paycheck to come in. The best solution that people can have tucked in their back pockets is an emergency fund, so they can deal with these complications right away.

 What is an emergency fund?

An emergency fund is a must-have for people looking to have economic stability and security — experts rate it as one of the most important financial accounts people need to have in their lives. The reason why emergency money should be separated from a checking account is that you will be tempted to dip into it. Keeping the funds in a different space will make sure that they stay untouched, until the right circumstances arrive.

 How do you get started?

Industry experts also advise that people only use bank accounts or physical bills for this type of fund. Relying on investments in the stock market can be risky and result in a major disappointment when you’re looking for financial support. You want to have a fund that is reliable and that you can withdraw at a moment’s notice, so you can deal with a serious situation the second that it happens.

 The ideal amount you should have saved up in an emergency fund depends on your income and your living expenses. It’s recommended that you have enough to cover between three to six months of those specific expenses. Some people may find achieving this end-goal to be very difficult in a short amount of time. If this is true for you, just work on putting as much as you can manage so that the account isn’t completely empty.

Anyone who wants to build an emergency fund should let people in their social circle know they are trying to reach a new financial goal — this lets friends and family members know that you need them to give you support, not to entice you into spending. This way they won’t pester you to come out for a round of drinks or head to a restaurant opening. When you have everyone on your side, you’re less likely to sabotage your budgeting plans.

 What qualifies as an emergency?

You don’t need to dip into the fund for home repairs that can be placed on the to-do list for a few months or for shopping spree that was higher than expected. The fund is for situations that require immediate attention and when there is nothing in your other accounts that can make the payments.

One of the biggest financial emergencies that people has to do with their health — maybe they had to take an unexpected trip in an ambulance or they need to get prescription medicine that their health insurance won’t cover. A one-time accident that results in a broken arm can lead to more than two thousand dollars in hospital bills.

Here are some other examples of emergency situations that the fund would qualify for:

  • Your car won’t start
  • Your pet needs emergency veterinary surgery
  • You have overdue bills for essential services
  • Your basement flooded
  • Your water heater broke down

What can you do if you don’t have a fund?

You may not have a fund that you can dip into when one of the previously mentioned emergencies happens to you. Or you could have just started saving up for one, but you have a tiny number in the account that can’t cover a fraction of your payment. If you are worried about what to do when you need cash in a hurry and you don’t seem to have any savings or credit that you can access straightaway, there are solutions out there.

An online installment loan could be the quick fix that can get you through a distressing dilemma. After your application gets approved, you can use the money for your issue and then repay it over time in convenient amounts. A company like MoneyKey allows you to apply online, so that you can go through the swift process on your computer at home or on your smartphone. It’s always difficult to tackle an emergency expense, but this solution can make it a little easier for you.

You could be fortunate enough to have a car that always runs, a house that never falls into disrepair and a clean bill of health. It’s possible to avoid major conflicts and financial obstacles in the future. However, you should never bet too much on luck to keep you afloat — having a fully-stocked emergency fund will be the perfect safety-net in case the worst happens.