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By setting up an emergency savings fund, you'll have money available to deal with unexpected medical bills, auto repairs, and other problems
Key takeaways:
Are you financially prepared for emergencies? An emergency can damage your bottom line; fortunately, an emergency savings fund can help cushion the financial impact. As our co-founder Suze Orman says, “It is security. It is peace of mind. It is protection.”
With an emergency savings fund, you'll have money stored away for the worst-case scenarios. Here are five key reasons to set up and maintain one.
1. Job loss
In the event that you lose your job, you may qualify for unemployment benefits. These benefits will be temporary, however. There may also be instances in which you won't qualify in the first place.
An emergency fund can be used to cover your housing, food, utility, and other monthly expenses if you lose your job. In addition, the fund can reduce the pressure to find a new job right away. As such, it can help you take the time necessary to identify the right role, rather than accepting the first one that becomes available out of desperation.
2. Medical emergency
Heart attacks, strokes, and other medical emergencies can occur without notice. These issues need to be addressed right away but can leave you with substantial medical bills.
An emergency savings fund can be used to cover sudden medical charges. Plus, it ensures you won't have to forgo medical treatment due to the costs associated with it.
3. Auto repairs
Car repairs can cost hundreds or thousands of dollars. You need your car to go to work, bring your kids to school, buy groceries, and perform other everyday activities.
Thanks to an emergency savings fund, you'll have money available to get your car fixed if it requires immediate repairs. You can even use your fund to cover the cost of a rental car or alternate transportation as your car gets fixed.
4. Home repairs
If a storm damages your home's roof, you cannot let the issue linger. Failure to do so can cause long-lasting property damage and put your family in danger.
An emergency savings fund can help you cover the cost of home repairs. The fund gives you the money to hire plumbers, roofers, and other home improvement professionals to fix the damage to your house. Or, if you need temporary housing while your home is being fixed, you can use your emergency savings fund as well.
5. Travel expenses
If a family member or friend experiences a medical emergency or passes away, you may need to travel out of state. At this point, you'll likely need money to cover the cost of a plane or train ticket, hotel, and other travel expenses.
You can use an emergency savings fund for sudden travel expenses. The fund provides you with instant access to money you can use to cover travel costs so you can get where you need to go at any time.
Clearly, there's a lot to appreciate about having an emergency savings fund. To get the most value out of your emergency savings, you need to plan accordingly. That way, you can set up a fund that serves you well into the future.
How to get started with an emergency savings fund
The sooner you set up your fund, the better prepared you'll be for any emergencies that arise.
Let’s look at four tips to help you get started.
1. Establish a savings fund goal
Decide how much money you want to save in your emergency fund. Suze advises saving up to 12 months of living costs.
2. Track your finances
Build up your fund over time. If you reach your savings goal, you can always continue to add to it. This increases the likelihood you'll have sufficient finances available in an emergency.
3. Use your fund at appropriate times
Draw from your fund only when it is absolutely necessary to do so. If you make a withdrawal from your fund, replenish it as soon as you can.
4. Get help from your employer
Sign up for an emergency savings account from your employer. If emergency savings account options are unavailable, encourage your employer to offer them.
Once you set up an emergency savings fund, you can manage it however you choose. Of course, if you want extra help along the way, it pays to partner with an emergency savings account expert like Secure.
Companies can offer SecureSave, a workplace savings program, that makes it easy for employees to save for emergencies. With SecureSave, you can automatically save from each paycheck, receive match contributions from your employer, and when the unexpected happens you can access your Emergency Savings without penalty or cost to you. SecureSave is the first purpose-built emergency savings app for employers and employees. Join our waitlist today to help us spread the word about SecureSave.