“Gee, I wish I hadn’t saved up so much money,” said no one ever.
However, you may have heard a financial planner say “So, what are you counting as your emergency fund?” The question leaves many of us dumbfounded. Anything extra each month goes toward credit cards or unexpected expenses, right? The rest is often tied up in retirement accounts or funds that we either cannot or are not supposed to touch for “emergencies”.
But while we can cross our fingers hoping that a major household system like the heat won’t fail, or that everyone in our family will stay healthy, the truth is we’re only biding our time. At some point every person will experience an emergency—something “unexpected” that requires serious cash on hand.
Having some sort of liquid savings plan is critical. Here are some reasons you’ll appreciate having an emergency fund ready to go should you need it:
Peace of mind Sometimes you really can “buy” peace of mind. Even some of the most successful people weren’t taught to set up an emergency fund during the early stages of their careers. But as their assets and knowledge have grown, most would now attest to the sheer peace of mind that liquidity can bring.
Career flexibility With an emergency fund set aside you can get more creative about career choices and decisions. Knowing you have some money in the bank, you can be more flexible about leaving an unsatisfactory job or starting a new venture—even if the timing doesn’t line up perfectly with severance or other temporary financial coverage.
Preventive maintenance While it’s not something that is fun to spend money on, doing regular maintenance on a home, car or other piece of property can save you serious funds in the long run. With an emergency fund you can arrange prompt and proper maintenance so that small problems don’t become big, expensive ones.
To find out the other benefits of having an emergency fund and to start taking steps to build one, check out my latest article in Living Safer magazine. You can also find the article in digital form by clicking here.
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Photo Credit: szefei