Emergency funds are a necessity. There’s no negotiation on this one. The personal finance community knows this, and I hope everyone knows this. Having even just $1,000 on hand can save you from years of debt. I’ve had an emergency fund without any idea of when I should use it. That cash cushion was always meant for some vague future where I’d be out of a job, injured, or otherwise thrown for a loop. It’s never been money that I intend to spend. There’s no guarantee that I will ever use it, but I still want to have it just in case. The thought of needing to spend it genuinely stresses me out.
Until I had to.
When there’s an emergency, we have no time to worry about how to pay for it. We do whatever it takes to resolve the situation. It’s why so many people sign up for credit cards in the first place. We want a safety net. That money is there for when we need it, whether it’s ours or not. But that’s the thing – the money isn’t ours. We have to pay it back, and that adds another layer of stress to an already stressful situation.
Now I understand why an emergency fund is so important. It’s means having the assurance that if something goes wrong, there’s one less thing to worry about. You can buy that last-minute plane ticket, repair that faulty engine, or cover that emergency surgery. There’s no anxiety that this expense will put you in debt. You can act without a second thought.
Less than two years ago I couldn’t have covered an emergency expense. I would have had to ask for help or charge it to my credit card. And I’m not alone. Half of all Americans don’t have $400 for an emergency. That is a huge problem. We can’t rely on credit cards or loans to bail us out when disaster strikes. An emergency is bad enough – paying off debt for it is even worse.
If you don’t have an emergency fund, or you’ve tapped into yours and need to build it back up, please make it a top financial priority. Nothing is more important than being able to handle an emergency. The first month or two you will miss the money. But pretty soon you won’t even notice it’s gone. And the piece of mind of knowing that you are covered no matter what will be well worth it.
~ Ms. RW