If you’re serious about looking after your finances, there is one thing that you absolutely must not neglect to do – build up an emergency fund. Why? Because having an emergency fund will make all of your financial decisions and hardships much easier to deal with.
Here are just some of the biggest benefits of having an emergency fund for you to consider:
You won’t need to rely on credit
Once you’ve built up your emergency fund to a decent level, you won’t have to worry so much about those unexpected expenses like the car breaking down on the washing machine giving up the ghost. Instead of having to use credit to pay for these kinds of financial emergencies, you will be able to use your savings to get what you need, which means you won’t have to pay interest on top of the original expense – something which can quickly see your finances spiral if you aren’t careful.
It’ll give you breathing space
What would you do if you were say, injured at work, and could no longer earn a living? Sure a good personal injury lawyer may be able to get you a settlement but that takes time. Or, what would you do if you got sick and couldn’t afford the medical bills that weren’t covered by your insurance policy? If you have an emergency fund in place, you would have some breathing space. You’d be able to cover you4 expenses, at least for a while, until a better solution was worked out, Without an emergency fund, you would struggle and suffer unnecessarily.
You can earn interest
If you start saving into an emergency fund, be sure to save in a bank account that offers a decent interest rate. That way, you can not only ensure that you have a buffer in place to protect you against any financial emergencies, but you will also be able to actually make money. Sure, interest rates aren’t amazing right now, but you’d be surprised how soon it all adds up, especially if you keep adding to your emergency fund regularly over the years. Just make sure that you choose an account where your money can be instantly accessed. Sure, you probably won’t get as much interest as you could, but you need to be able to access that money when an emergency happens, or what is the point of building an emergency fund at all?
Getting loans will be easier
If you do need to access more money that you have in your emergency fund, you may still find it useful. Why? Because already having savings in the bank often lowers your risk factor when banks are considering whether to lend to you. By having a decent sum already put aside, they are far more likely to improve any lines of credit you do need than if your account only has a few dollars in it.
For your own peace of mind and the security of your family finances, start building an emergency fund now.