The Benefits of Having an Emergency Fund

When people go through stressful events or traumatic situations where they are forced to pay for unforeseen costs, it can be easy for them to rely on their credit cards, take out a loan, or tap into their retirement account. If you are struggling with every unexpected expense that comes up, having an emergency fund will not only protect you from debt, it will also ensure that you have enough money to fund your future retirement.

Here are some of the top reasons for you to start building that emergency fund.

Emergency fund

Get Out of Debt

If you are trying to pay off all your debt, an emergency fund will ensure that you don’t accumulate new ones every time something unexpected comes along your way. It will be easier for you to shell out the extra money for a car repair or a medical emergency when you have an emergency fund that you can dip into rather than be forced to take out a new loan just to get them paid off.

Protection from Job Loss

This is definitely one of the top reasons why many people choose to build their own emergency funds. In a volatile economy, unemployment is a considerable that most people face. If you are facing job loss with the unlikely potential of finding another one at the same level of pay immediately, having an emergency fund will be your saving grace. For many people, the loss of employment means living on the financial edge – or hoping that they’d be able to get by without encountering any major crisis.

Having an emergency fund means that you will not be forced to just accept the first offer that comes along, even though the work is not something that you actually want to do. With an emergency fund, you can live off your savings while you take your time to evaluate your prospects and find a more suitable form of employment. It gives you the confidence to negotiate the salary you are entitled to, and not desperately take on the first job that gets you out of a stressful situation.

Shopping girl

Prevent Unnecessary Purchases

Having an emergency fund means that you can take advantage of an amazing bargain for something that you have wanted all your life, such as a 50% discount on AliExpress on the electronic mobile device that you have been wanting to buy for so long. This may be a once in a lifetime purchase that is extremely difficult to pass up, and having an emergency fund means that you do not have to.

At the same time, however, an emergency fund will also prevent you from making unnecessary purchases of items that you do not really need. It may be hard to keep away from making use of the available online promos like Jumia promos for buying items that you will use only once and never use it again. An emergency money essentially means that you are keeping your money away from your reach so that you are not tempted to use it for something unnecessary or frivolous.