These days, emergency funds are about as popular as cup cakes on the Food Network channel. Everyone loves the idea of an emergency fund, but appreciating an idea means nothing without a dose of personal application.
Unlike the gourmet cupcakes that require an expert baker’s tricks and knowhow, you don’t have to be a financial genius to create your own emergency fund. Read these five iron-clad reasons to begin your own emergency fund.
At the end of the post, if you still think you have a reasonable argument to stay away from safeguarding against financial disasters, we’ll just take it outside, alright pal?
An Emergency Fund for Emergencies
Get it? Do you like the ‘writer’s block’ humor in that heading? But in all seriousness, an emergency fund is supremely important because you never know where or when a financial emergency will show it’s ugly face.
In the simplest way I can explain it, you should start saving an emergency fund because there will be times in your life where having a little extra cash will save the day.
Although many financial experts recommend saving anywhere between one to five months of income, that’s not a possibility for everyone – at least not at the beginning.
Don’t be afraid to start small. Saving $500 or even $1000 could help safeguard you against life’s little speed bumps and keep you from wrecking your finances.
Avoiding the Credit Card Pit of Despair
Let’s face it, if you need cash immediately and you have zero emergency fund, what are you going to do? Unless you have a rich relative that loves giving away money, you’re probably going to flip through your wallet and pull out a credit card to save the day.
Problem is, you’re really only making matters worse, in the long run at least. Using your credit card as some sort of diabolical, upside down, twisted emergency fund is one of the worst decisions that you can make.
It’s like putting a Winnie the Pooh bandaid on a compound fracture. Depending on the cost of the emergency, using your credit card could set you back for years to come.
Because Cash on Hand is Immediate
If things get bad enough, there are some assistance options out there for you to choose from. You could consider welfare, food stamps, unemployment benefits, and a few privately owned resources for personal assistance. And, when used in moderation without being abused, most of the programs serve a necessary purpose.
But even if you chose to seek unemployment after a layoff, the paperwork will take time. Having a fully-stocked emergency fund, especially with enough money to cover a month or two of bare-bones living expenses, will help you immediately.
You won’t have to wait for paperwork to finalize before you can put food on your table or keep the mortgage paid up.
Your Financial Anxiety Will Drop Dramatically
This reason may be far down on the list for some, but it’s important nevertheless. Saving up money for an emergency will help protect you against life’s unseen financial disasters, which in turn will help you breathe a sigh of relief.
There’s a sense of calm that comes over you when you know that you have financial backup. There’s also a personal reassurance in your leadership skills when you realize that you’re making smart decisions for your entire family.
If you struggle with financial anxiety or anger, this reason might be numero uno for you. You’ll be surprised how different daily life can feel when you’ve taken the right steps to secure yourself and your family against life’s unseen costs.
Because It’s So Easy
The last reason I want to give about why you should start an emergency fund is that there’s no good reason NOT to start one. It’s way to easy to set up. Yes, you’ll have to show a little self-control with your finances, but the process itself is very low maintenance.
It’s not as complicated as an IRA or 429 Plan (if those terms happen to scare you). I dare say it doesn’t even involve paperwork. At minimum, you can store $20 in cash every week in a jar in your closet. Obviously, there’s no interest being earned in your closet (too bad), but it’s easy.
You could also open a regular savings account within your current bank account. Most of the time there are no fees associated with such an account, and you’ll be paying yourself with a little interest.
Whatever your situation, don’t let the idea of starting an emergency fund scare you away because you think it’s too difficult.
Photo By zigazou76