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Even with your best intentions, life happens, and you may have to face a major financial emergency. These six situations are some of the most common.
Key takeaways:
Financial emergencies happen every day, and they contribute to lots of stress and expensive nightmares like bankruptcy, foreclosure, and excessive debt. Just 44% of Americans say they could cover a $1,000 emergency expense, according to a Bankrate survey. And, 40% of people in the U.S. say they couldn’t pay for a $400 unplanned expense.
Remember that a big expense isn’t necessarily a financial emergency. Major costs like going on vacation, putting a down payment on a house, or paying for a wedding aren’t emergencies because they’re expected. And, they don’t necessarily get in the way of your ability to earn a living and repay any debt you accrued in the process.
Emergency expenses happen all the time, though. You may think that you don’t need an emergency savings fund and that you can just get by covering your monthly expenses, but there will inevitably be unexpected expenses that arise. These are the most common financial emergencies that could severely hurt your pockets if you’re not prepared.
1. Medical emergencies
Health scares can be extremely costly to Americans. Stanford economist, Neale Mahoney, found that the amount of medical debt in this country is at least $140 billion. In addition, out-of-pocket medical costs are one of the most common reasons that people take hardship withdrawals from their retirement accounts.
Even though most people pay a monthly health insurance premium, when something serious happens, like a critical illness diagnosis or an accident, medical bills can go through the roof. Without extra savings, many people have no option but to go into debt just to get the care they need.
2. Car problems
When your car breaks down or you get into an accident, the cost of repairs or replacement can be significant, and that’s without factoring in any injuries that happened. Cars don’t last forever and they have to be replaced from time to time. Without a car, many people couldn’t make it to their jobs every day. Sometimes costs are so high that a car issue could turn into a financial emergency.
Beyond standard, affordable oil changes, you may need to contend with lots of repairs down the road. Issues with the air conditioner, radiator, brakes, engine, battery, or transmission can get costly fast. And issues will eventually happen.
3. Losing a job
One of the worst financial emergencies you can experience is losing your job, especially if you don’t have emergency savings. You’ll lose your main source of income, and it’s not always clear when you’ll get another reliable job to fund your life. Unexpected job loss happens frequently because of business closures, company budget changes, and more factors out of your control.
There are lots of devastating impacts of not having a job to go to each day, or being able to support other people in your household. You always want to be sure you can cover your everyday living expenses, even if the worst happens with your current position or company. An emergency savings account (ESA) can provide more peace of mind should that happen.
4. Household repairs
Homeowners know just how fast something can go wrong that they and they alone have to deal with. One survey from GOBankingRates found that 26.4% of Americans use their emergency savings to cover major household repairs.
Emergency repairs that can make the biggest impact on your wallet include:
If you’re a homeowner, you need to have dedicated funds set aside. If something happens that you have to deal with on the spot, especially if it’s a safety issue, you must be prepared.
5. Unexpected move or life change
Moves are expensive, from the moving crew and equipment to a down payment or rental agreement in a new location. You may have to move unexpectedly if you’re going through a breakup or divorce, are getting relocated with your job, are going through a foreclosure, or have to be closer to a sick family member to assist with care. These situations do happen, so make sure you can stay on your feet when you’re going through a transition by saving for an emergency before it happens.
6. Pet health emergencies
Many people think that they’ve got their pet expenses under control each month. But, pet emergencies can be extremely costly, especially without pet insurance. Around 70% of American households have a pet. But, could you afford a bill of thousands of dollars if the worst happens?
Health issues like a broken bone, surgery, foreign object extraction, dental emergency, or internal rupture can put a major burden on your finances. And these things happen! Think about these events that could happen when you’re considering setting aside some money for pet health emergencies.
Why go with a SecureSave ESA?
Having a dedicated ESA helps you mitigate risk and avoid a disaster when you have to deal with an unexpected major expense. You never know what will happen in the future, and it’s always better to start preparing now than to be hit with a bill you can’t afford.
At SecureSave, we help employees set up a more secure financial future by offering an employer-matched emergency savings account. We make it easy to set up achievable savings goals so you’re always ready when the unexpected happens. Encourage your employer to offer this benefit by signing up for our employee waitlist and reaching out to your HR team to share your interest in this program.