Preparing for the
Unexpected
The Importance of an Emergency Fund
Preparing for the Unexpected
The importance of an Emergency Fund
Life is filled with uncertainties, but you can be prepared to minimize some of the financial stress and strain by having an emergency fund.
TIP!
» Keep emergency funds in a separate savings account.
» They should be easily accessible.
» Earn interest on the funds.
» Look for accounts with penalty-free withdrawals.
Emergencies: The Emotional Impact
An unexpected event often carries with it an emotional impact. An emergency fund gives you the ability to handle it without the stress of taxing your personal finances. Think of an emergency fund as a side order of peace-of-mind.
Good Reasons for an Emergency Fund
 |
Insurance Claim Deductibles
Insurance rarely covers 100% of damages. If you haven't met your deductible, your emergency funds will be readily available to pay your portion of the expense. Be sure to reimburse your emergency fund in the future.
|
 |
Small Home Repairs
You may need to pay for small home repairs not covered by homeowner's insurance. Example: Your lawn mower throws a rock and breaks a window.
|
 |
Car Repairs
A car repair may not be covered by insurance or you may need to pay for the repairs immediately to get you back on the road while you wait on insurance reimbursement. Example: Accidentally running over an object on the highway and damaging the radiator.
|
 |
Loss of Personal Items
Occasionally there may be personal items that must be replaced quickly. Example: You lose or have your cell phone or laptop stolen while traveling.
|
 |
Travel for Funeral or Illness
A death in the family or an ill/hospitalized family member may require that you incur considerable travel expenses including airfare, rental car, hotel and meals for your family.
|
 |
Unexpected Illness or Injury
Unexpected loss of income often comes as a result of injury or extended illness. If you do not have disability insurance, an emergency fund can temporarily fill the gap without going into debt until you are able to return to work. Example: A carpenter earning an hourly wage sustains a broken leg, requiring 4-6 weeks away from work.
|
 |
Job Loss
The key to financially surviving a job loss is being aware of the amount of reserves required to sustain your family until you can obtain future employment.
|
You want to avoid going into debt and/or using credit cards, taking out short-term loans, or tapping your retirement fund. Experts suggest setting aside 3 to 6 months of living expenses. Review your family budget and plan accordingly. Click here to download a budget form.
HELPFUL LINKS*
