There are so many reasons people have an emergency fund. Whilst there are many emergencies you can plan for should they crop up, there are also those emergencies that you don’t know are emergencies until they actually happen to you. Let’s take a look at some of the things you might use an emergency fund for and why you should try to build one.
Safety Net
The reason we have an emergency fund is due to the way we work. Being self employed creates so much freedom to work on what you want, when you want but it also presents risk. We figured out what we’d need to survive should work fall apart. By survive I mean mortgage payments, bills and food. We totalled the number for twelve months but many emergency funds like this are based on a minimum of six months. Should we need it, it is there.
In all honesty, the global Coronavirus pandemic has opened my eyes to the fact that it is wise to have this in place. If you work this way or perhaps have a zero hour contract an emergency fund could be a great idea for you. It’s also beneficial for those who feel they have comfortable contracts with an employer. What would you do if you suddenly lost your job due to redundancy? Or you were in a car crash and couldn’t work for a few months?
Funeral Fund
What would you do if you had to shell out for a funeral. In times of bereavement the last thing you want to worry about is money. There is enough stress with a journey through grief without adding into the equation finances. Funerals are costs that we will all have to pay at some point. It might be the case that you get the money back once the person’s estate has been organised but you might have to settle bills in the meantime. An emergency fund could be used to go towards the funeral payments of your parents or loved one should the unexpected happen.
Travel Costs
The world seems smaller than ever with so many ways of getting in touch with loved ones and friends and family lives in different countries. However, it still costs should you have to travel. I have a sister in Australia. if something was to happen and I had to leave on a plane quickly, a quick search of today’s prices show me that an economy seat costs just over £610. I wouldn’t be able to afford to just pay that. But having an easy access savings account with an emergency fund in it I could easily transfer the money over into my current account and pay for a flight.
Unexpected Bills
What would you do if you got hit with an unexpected bill? Maybe your car breaks down and you either have a large repair bill or need to find a new one. Even second hand cars cost money. What if you your boiler broke and you had to get a new one installed? Maybe you rely on your laptop, could you run your business without it? An emergency fund can help your way out of these unexpected bills. Just don’t forget to replenish it!
