Friday, October 24, 2008

Great Reasons to Have an Emergency Fund

A friend's recent medical emergency reminded me that having an emergency fund can make a potentially stressful and expensive situation a lot easier to handle. If you do not already have an emergency fund in place, I urge you to start by setting up an automatic deposit into a savings account that you can easily access. Even having $20 in there will be able to help you at some point. Ideally, you would have enough to cover insurance deductibles at the very least. We've all heard about having 3-6 months of income available, which is a rather lofty goal, but every deposit should create a feeling of ease and lessen potential anxiety and worry.

1. A sudden medical problem for your or your dependents such as injuries, appendicitis, or an asthma attack can land you in the emergency room and chances are good your insurance has a hefty co-pay. Not to mention any prescription medicine costs and if you don't get paid if you miss work.
2. A car accident that causes damage of any kind will not be paid for until you meet your deductible. Just think what you would do if your car suddenly was not available. An emergency fund could help you pay for a rental or quickly arrange to have your car fixed if possible.
3. Theft of your your wallet, purse, or credit card means you will have a harder time accessing any money that you have. This is especially true if someone uses your credit card to make purchases. It can take several days and even weeks to reconcile your account and credit you with the money you lost.
4. A sick or injured pet can unexpectedly cost you big time. One of my cats had a seizure awhile back and the emergency vet charge was $74 just for a veterinarian examination.
5. Any household problem that results in filing a claim on your renter's/homeowners insurance such as a fire.

I can think of many other reasons but these are probably the most commonly-utilized reasons to take money from an emergency fund. Remember to only use it for emergencies.

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