6 Reasons You Need an Emergency Fund

Life is full of surprises, many of which aren’t pleasant. And with the soaring cost of living and declining wages, managing your monthly budget might have become a bit tricky, leaving no room for unpredicted expenses. A sudden loss of income, unplanned house repairs, or a dental accident – whatever it is, being tight on money during an emergency can be very stressful.

This is where an emergency fund comes into play. It can provide an immediate resource to alleviate financial trouble. Not convinced? Below are six reasons to build an emergency fund.

1. Need help getting out of debt

You can’t feel financially secure while bearing a debt – no matter how small. An emergency fund can help stop debt from accumulating with every financial setback. It covers the expenses of unpleasant surprises, like car repairs, while allowing you to focus on paying off your current debt.

2. Cracking down on budgeting

If you never thought about budgeting before, you should be considering it now that the recession is hitting hard. One of the best and most sustainable budgeting methods is the 50/30/20 rule, which divides your monthly income into three groups: 50% for needs, 30% for wants, and 20% for financial goals.

3. You only have one source of income

Relying on a single source of income leaves a family financially insecure. But if you don’t have multiple streams at the time being, you still need to be ready for emergencies that might impact your monthly budget.

Having an emergency fund can protect against complete loss of resources. If you only have one source of income, or if there is one breadwinner in the family, it’s important to have about a year’s worth of expenses set aside. This will provide a safety net if the breadwinner suddenly loses their job or gets ill.

4. Repairs and fixtures

If you own your house, you’re more likely to have to pay for yourself. From unclogging a toilet to fixing draughty windows, learn to take care of the basics yourself, especially if you’re living alone.

However, while some repairs are easy to handle, others require expert hands. An emergency fund can address urgent repairs, such as plumbing or heating. A fast way to cover the cost of an emergency is to look into a quick loan or an alternative credit You can also use it to invest in home repair tools.

5. Require help with travel expenses

If you live away from home, whether for work or study purposes, visiting family might be a bit expensive. This is especially the case if you live abroad and require a last-minute booking, which is likely to be on the pricier side.

Having a good emergency fund can cover your travel expenses and ensure you get home whenever the need arises.

6. Being cautious of medical emergencies

Whether you have a chronic illness or are aware of potential emergencies, an emergency fund can cover unpredicted medical bills. Be it a throbbing toothache or an urgently needed cosmetic procedure, if a case cannot be covered by the NHS as soon as you want – or at all, you’ll probably choose to opt for a private clinic.