Why You Need to Have Emergency Savings

Do you have an emergency fund filled with savings? No? That’s something you should consider changing.

Find out why you need to have emergency savings.

Small Emergency Expenses

Emergency savings can help you handle small emergency expenses immediately after they crop up. What is an emergency expense? It’s an urgent, unplanned expense outside of your personal budget. You will need to respond to this type of expense right away. Leaving it for a more convenient time isn’t possible.

What are some examples of emergency expenses you could face?

• Your car gets a flat tire in the middle of your morning commute, and you need to call a tow truck to put on a replacement.

• One of your dental crowns comes off, and you need to make a last-minute dentist appointment to fix it.

• Your pet gets suddenly sick, and you need to take them to a veterinary clinic.

• Your kitchen sink gets clogged, and you need to call a plumber to clear it.

Are There Other Solutions?

Without emergency savings, you may find it challenging to cover these small emergency expenses. You could use funds sitting in your checking account, but it’s likely that those are reserved for other budgetary needs, like your upcoming utility bills or groceries.

A better option for managing the emergency expense without emergency savings would be to use a credit tool. If you have a credit card, you could charge the expense to it and then pay down the balance afterward. As long as your balance isn’t close to the limit, this could be an effective solution when you’re unsure about what to do.

Another credit tool that you could use is a personal line of credit. As long as you request a withdrawal within your credit limit, you can use the borrowed funds to cover the emergency expense and then make repayments afterward. If you don’t have an account already, you can apply for a line of credit online when you meet all of the qualifications. You just might get approved for one.

Loss of Income

Another reason why you should have a stash of emergency savings is it can help maintain your financial stability when you can’t rely on your income. If you aren’t bringing in a paycheck, you can use your emergency fund to cover essential budgetary expenses, like your rent, groceries and utility bills.

These are some examples of situations when you might need to do this:

• After losing your job

• When you’re too ill to work

• When you take unpaid bereavement leave

• When you take unpaid leave to care for a sick relative

Are There Other Solutions?

Credit is not the best solution to turn to in these circumstances. After all, credit is borrowed—without a steady stream of income available, you may be unable to make repayments. Plus, many credit tools require proof of steady income in their application process. Without that qualification, your application will not be approved.

Depending on your circumstances, insurance could help you maintain your financial stability in these difficult times. A life insurance plan could help you manage funeral costs and other financial matters after losing a relative. A disability insurance plan could provide some income if you develop a disability that prevents you from working. You could use that to pay your bills.

You may also be eligible for economic relief through government programs, like emergency rental assistance (ERA).

Stop living without emergency savings. You never know when you’ll need them.