Expenses are a part of our day to day existence. In the morning, we have to spend for a cup of chocolate cappuccino or any other hot drinks to start the day right. Some of us may even spend a few more bucks to buy breakfast meals. Without a single doubt, a day wouldn’t be complete without the need to spend every now and then.
Even though spending is part of our daily activities, there are some instances when an unexpected expense requires us to get fast title loans. To aid with this, emergency funds are invented.
What is an Emergency Fund?
According to investopedia.com, an emergency fund is the type of account that is used to set aside funds or amount that can be used for emergency purposes. Usually, an emergency fund is used when the person loses a job, experience an illness, and other major expenses. The core purpose of having an emergency fund is to improve financial stability and security by creating a safety net of funds.
2 Major Types of an Emergency Fund
Short-term Emergency Fund
The short-term emergency fund is the type that allows you to withdraw money in order to patch up with immediate expenses. It is a type of an accessible account.
Long-term Emergency Fund
The long-term emergency fund offers help for large-scale events that will require a larger amount of money. It can be used when your home was damaged due to natural calamities and disasters or if you lose a job. In order to withdraw, you have to personally visit the bank teller and provide several documents that will serve as a proof that you need a large amount of money.
10 Essential Reasons why you need an Emergency Fund Today
Saving money is an important aspect of our lives. Without having any savings, it would be difficult for us to work emergency expenses with a limited budget. If you haven’t started saving for an emergency fund yet, the following reasons might convince you to open an emergency fund account now.
- Emergencies do happen at the most unexpected time of the day.That’s the main reason why it is called “emergency”. Thus, unexpected events, most especially those that wreak havoc on the budget and the well-being of a family require prompt and immediate action or getting hassle free payday loans. However, just like what was mentioned earlier, it is almost impossible to make certain actions if the amount of money you have in your wallet or pocket is limited. In these kinds of scenarios, an emergency fund comes in handy. If you have an ample amount in your account, unexpected events won’t bother you financially. Aside from that, financial stability is really important.
- The economy is a fast-changing field.The exchange of dollars may go up to the ceiling and down to the floor. Even though we don’t have to be an economist or experts in the field, it is easy for us to conclude that the changes in the economy can have a great impact on us. In addition to that, it can make or break our daily budget. So, if you have an emergency fund, the rise or fall of the economy won’t really have adverse effects on your side.
- The job position you currently hold may be given to your co-worker even if you don’t want to.As a result, the salary you get will decrease and it might not be able to suffice the basic and daily needs of the members of the family. So, having an emergency fund can help a lot to back you up when you need it.
- If your family starts to grow a little bigger, moving from one house to the other would be so much better.Besides, providing a comfortable place to live and reside is a basic need that each and every family should experience. But, let’s face the fact that investing in a new home or place is not as easy as we would like it to be. Investing in a new home is expensive and it can cost an arm and a leg if you’re not ready to make the purchase. On the other hand, if you already have enough money in your emergency fund, investing in a bigger and more comfortable house isn’t a big deal.
- Aside from a major investment like a house or a real estate property, there’s one thing that we should never fail to invest in- health.Just like what everyone says, our health is our primary wealth. Therefore, taking good care of our health and well-being is very important. Unfortunately, lab tests and health examinations these days are getting more and more expensive. With the aid of an emergency fund, you and your family members’ health and well-being are highly secured. You can also opt to spend some more for vitamins to ensure the proper wellness of the mind and body.
- Education is equally important. Education will serve as the foundation for your kids’ future and profession. And it requires thousands of dollars depending on the type of school, type of education, and other expenses related to studying. If you are aiming to provide the best education for your children, opening an emergency fund is of primary importance.
- The emergency fund can also be used in repairing leaks in the roof or damages in the walls.Emergency funds are heaven sent even for minor home repairs and damages. We can’t emphasize enough the importance of having an emergency fund that can serve as a backup when all of your other sources of finance or money have failed to do so.
- Opening an emergency fund doesn’t require a big amount of money.To tell you frankly, an emergency fund is one of the cheapest ways to save. Most banks and financial institutions ensure that they can offer the most affordable and beneficial emergency funds for their applicants. In addition to that, they make certain that the type of emergency fund and savings accounts are highly suitable for the specific needs of the applicant.
- An emergency fund is versatile and it can be used for different expenses.The money in your emergency fund can also be withdrawn at any time of the day depending on the terms and conditions provided by the bank or the financial institution. Because of this, an emergency fund is turning into a mainstream favorite for individuals who are looking for various ways to save.
An emergency fund has the capacity and capability to save you from unnecessary budget cut most especially if you’re not fond of doing so.Since you’re financially stable and ready, it will be easier for you to spend for you and your family’s basic needs without the possibility of cutting the wants. In addition to that, cutting the usual budget of the family would nearly be impossible if they are already used to it. So, using some of the money saved on your emergency fund is a better idea than restricting the members of the family to spend every now and then.