Why Build An Emergency Fund?

By BankBazaar | August 30, 2018

There’s no denying that emergencies come unannounced and we bet you’ll agree that the only thing certain in life is uncertainty. So, no matter how well you plan your life or how financially sound you are, life can throw unexpected expenses at you anytime. Well, for such reasons, it’s important to put aside an emergency fund.

Why Build An Emergency Fund?

Fire! Help! What’s the first thing that you would do in case of a sudden massive fire? You would obviously look for a fire extinguisher to douse the fire, right? If you are one of those who plan for all types of incidents, you’re likely to have sprinklers and smoke detectors, which will tackle the fire for you and save the day. While a fire extinguisher helps deal with a fire emergency, similarly, emergency funds are life savers in the time of a critical emergency.

There’s no denying that emergencies come unannounced and we bet you’ll agree that the only thing certain in life is uncertainty. So, no matter how well you plan your life or how financially sound you are, life can throw unexpected expenses at you anytime. Well, for such reasons, it’s important to put aside an emergency fund. Still disagree? We give you reasons why you need an emergency fund to rescue you on a rainy day! Read on!

Additional Reading: How To Put Together An Emergency Fund

Medical Emergencies

Yes, we know that your argument will be that you have a Health Insurance policy. However, your insurance may not cover all expenses, always. What if you’re rushed to the ER for a surgery only to realise that your insurance doesn’t cover it? Of course, an emergency fund will come to your rescue. What’s worse? Being in an accident and then being bedridden for a few months. Better to be prepared than sorry, right?

Unemployment

You may have been a loyal employee, but if your company shuts down, you will be laid off. What next, then? Finding a job could take a while. So, you will need a financial backup that is an emergency fund. Maybe you didn’t lose your job but your spouse did or if your spouse decides to take a break due to an illness. Recovery can take long and can be expensive. Wouldn’t an emergency fund be helpful? Well, it’s not too late to start saving for it.

Additional Reading: Lost Your Job? Fret Not! Follow These Steps

Unforeseen Vehicle Repairs

A sudden car breakdown can literally lead to a nervous breakdown, no kidding! Even if you have your go-to mechanic who will offer you the cheapest possible options to repair your car, it could still cost a bomb. The same is applicable for two-wheelers too. Be it tyre replacements or problem with the engine, car doctors are as expensive as ours. While your insurance may cover some costs, not all costs are recoverable and that’s why you need to start an emergency fund. Got it?

Relocation

Relocation due to a new job offer or an unanticipated transfer can be expensive. Even if your organisation offers to reimburse the relocations expenses incurred, you will still need to have enough funds to actually manage the entire process. You have to be well-prepared if your job involves such kind of transfers or relocating, often or not.

Sudden Demise

Be it a close friend or a relative who passed away, you will have to pay for last-minute travel plans. Domestic as well as international airfare will need a large sum of money. If you have a place to crash at in the city where you are heading, you will save money. If not, you will need money for accommodation too. While no one really wants to think about someone’s death, you have to be ready for the worst of the circumstances.

Additional Reading: When Buying Life Insurance, Always Buy Term Plan First

Addictions

Like it or not, addictions are a real thing. Irrespective of what you or your partner may be addicted to, your bank account will have to pay the price for it. Whether you decide to stay addicted or choose to find a solution in therapy, it’s going to burn a hole in your pocket. While we hope you’re never in a situation like this, we’d still advise you to be ready.

Unexpected Pregnancy

Though you may have always played it safe, life had some other plans for you or your partner. If you are pro-life, we have to tell you that you will need a rather large emergency fund because as much fun as raising kids could be, it’s an expensive affair. If you aren’t pro-life, you still need a relatively smaller wad of cash ready, be warned!

Phew! Our list can go on and on because emergencies can be really unexpected and shocking. But we guess we’ve made our point, what say? So, planning on starting your emergency fund right away? Go ahead explore your options.

Additional Reading: Why Do You Need An Emergency Fund

We’d like to add that choose the right financial product to invest in for your emergency fund. You will need something that keeps your money easily accessible without a long, strenuous procedure of availing it. Cool?

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