Reasons Every Family Should Have an Emergency Fund
Long ago, men could expect to work at a job long enough to retire and be given a gold watch for their years of service. They knew that if they started working at a company, they would most likely be working there the rest of their life. Times have changed, however. Job security is a thing of the past. That is one of the reasons every family should have an emergency fund.
There are many reasons to have an emergency fund: your washing machine breaks down and cannot be fixed, you must attend a funeral across the country and have to buy a plane ticket, or you or your spouse get laid off from what you thought was a permanent job. There are reasons every day that cause us to spend money that we hadnít intended on spending. You could put those bills on credit cards, but youíre only delaying the inevitable. If you have an emergency fund, you may be able to avoid unnecessary debt and sleep a little better at night.
Every family should have an emergency fund, and the sooner you get one started, the better off you will be. Unexpected things happen to everyone. Starting to save money now is a proactive way to prepare for the unexpected when it happens.
Financial experts advise having a minimum three to six months living expenses in an emergency fund. This would include everything that you normally pay out over the course of a month Ė mortgage, car payments, car and home insurance, groceries, electricity, telephone, and any other bill you might have. If all of your bills add up to $2,000, you would need to save between $6,000 and $12,000 in your emergency fund.
If youíre used to living from paycheck to paycheck, setting aside money for an emergency fund might seem daunting. You can, however, find little ways to save money during the month. Refrain from eating out. Depending on the size of your family, that could save you $25 or more each meal. Donít go out for movies and popcorn. That would be an additional $30 or more savings. Take any money you would spend on luxuries and put it into savings. Itíll take a while to build the fund up, but youíll be so glad you did.
After you have started an emergency fund, how do you determine an adequate reason for getting money out of it? If your car breaks down and it will cost more than you have available in your regular account, by all means use the emergency fund. What happens if your air conditioner breaks in the middle of an oppressively hot summer? Yes, that constitutes an emergency. Go ahead and use some of the money you have saved up.
The reason every family should have an emergency fund is to avoid taking money out of their normal budget or putting more money onto credit cards. Emergencies happen and can wreck havoc on a family budget. By having an emergency fund set up, handling emergencies will be easier and will cause you much less stress. And it wonít take you into financial ruin should an emergency happen to you.