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16 Reasons You Need an Emergency Fund

16 Reasons You Need an Emergency Fund

1. Job Loss

Whether you are unexpectedly laid off or fired, or you have to leave a job for personal reasons, living without a paycheck is extremely stressful. You need a stash of cash to make ends meet between jobs.

2. Hours or Salary Cut

Maybe you still have a job, but your salary or hours are cut. This puts you in a position where you may want to start looking for a new job, but in the meantime, you don’t have as much income to cover your bills.

3. Car Repairs or Accident

If you use your vehicle to get to work, when your car has a problem, you need to get it fixed right away. There aren’t many car repairs that cost less than a few hundred dollars. If you were to get into an accident, the insurance deductible alone could be $500 or $1000.

4. Major Household Repairs

You likely have insurance to cover the major incidents of owning a home, but if you have a high deductible, could you come up with the cash to cover it? An emergency fund will be critical if your washing machine stops working or you need to get a dangerous leaning tree removed from your yard.

5. Major Health Expense

Even if you have health insurance, if you have a medical emergency, a surgery or need an expensive prescription, your policy’s deductible and co-payments could be hundreds or even thousands of dollars. Not to mention, you may need to miss work in the event of a true health incident.

6. Major Dental Expense

Many people living paycheck to paycheck don’t have dental insurance. And again, insurance may not cover the cost of an emergency root canal or tooth being pulled. Even getting a few cavities filled could add up to be hundreds of dollars.

7. Aging Parent Care

If your parents are aging or have health issues, you could find yourself with a sudden increase in financial responsibilities. You may need to chip in for their medical bills, home health care, putting in a wheelchair ramp or other special needs.

8. Emergency Pet Care

You may be able to easily afford your pet’s food, toys and regular shots. But what happens if your pet needs a hip replaced or gets cancer? Especially with aging pets (or dogs that eat things they are not supposed to), emergency veterinary bills can get very costly.

9. Unexpected Tax Bill

Maybe you normally get refunds, but a change in your situation (or tax laws) causes your taxes to be configured differently, leaving you with a fat tax bill. This can be a shocker, especially if you’re used to cashing a check around tax time.

10. Unanticipated Travel

Maybe there is a death in the family on the other side of the country or a friend or family member suffers a health crisis and you need to be there to help. Buying a last-minute plane ticket (and having to take time off work) is one way to surely gouge your budget.

11. Funeral Costs

It’s difficult to think about, but you may be responsible for paying for funeral and burial costs if a partner, child or parent were to pass away. Many funerals cost more than $10,000, which is not an amount of cash most people have just sitting around.

12. Cost of Living Increases

Maybe your landlord raises your rent. Or your heat bill goes dramatically up due to weather conditions. Or maybe gas prices skyrocket and you’re stuck with a very expensive commute to work. Even if you follow a strict budget, there are certain things you just can’t control.

13. Change in Living Situation

Your roommate could suddenly decide to move out, or you and your partner could break up. You could be left paying the rent or mortgage by yourself for a while until you can find an alternative situation.

14. Sudden Moves

If your company is transferring you to a new office or you need to move closer to family to take care of someone who is ill, movers, deposits, temporary housing and the cost of furnishing a new place can add up quickly.

15. Identity Theft

Identity theft is relatively common in this day and age. If your identity is stolen, it could take a while to sort it all out. In the meantime, you may not have access to your credit cards, bank accounts or debit cards.

16. Natural Disaster

No one likes to think about the possibility of a fire or hurricane wiping out their home, but even with insurance, replacing all of your worldly belongings would be extremely expensive. Covering costs of temporary housing, travel or insurance deductibles are just a few of the costs of a natural disaster.