An emergency fund can best be described as a stash of money that is set aside to cover the financial surprises that life throws at you, often at the most unexpected and undesirable of times. These unexpected events can be as stressful as they are costly and can come in the form of a job loss, medical emergency, car troubles, unexpected home repairs or unplanned travel expenses. The beauty of having an emergency fund is that you have a safety net and the peace of mind that comes with knowing you are able to pay off any bills without getting into debt. Aside from financial stability, here are 5 other reasons why having an emergency stash of cash can really make all the difference to you and those who are financially dependent on you:
Keeps Stress Levels Down
When an emergency payment needs to be made, it’s no surprise that it can threaten your financial wellbeing and causes a lot of stress, both for you and your family. If you are living without a safety net, you are essentially living on the financial edge with only sheer hope keeping you from running into a crisis. An emergency fund gives you some added confidence and helps you tackle any monetary problems without worry getting into the mix.
Keeps You From Being Reckless With Your Money
The best way to store your emergency money is by keeping it out of sight and out of mind. If you are able to put a little aside each month and aren’t tempted to dip into the fund when you next want to buy another handbag or car, it means you are becoming better at managing your money and will develop good habits when it comes to saving.
Stops You Making Bad Decisions
Having an emergency fund makes you more aware of your spending and means you are less likely to resort to relying on things such as credit cards.
You Can Rely On Yourself
Let’s face it; no one wants to rely on someone else when it comes to their hard-earned money. Being financially independent is one of the great things about going to work and makes the long hours spent in the office worthwhile. If you know you have an emergency fund to save you from dealing with an unexpected expense, you can take pride in the fact that you are able to face anything life is likely to throw at you and make it through to the other side.
You Don’t Fall Further Into Debt
If an unexpected expense arises and you are forced to use your credit card or borrow money from someone else, there is always the chance that you are unable to make repayments and have to get into more debt in order to get out of the initial lot of debt. If you have an emergency pot of money you can dip into, you are able to carry on with the rest of your payments without juggling repaying a lender too.
What Happens If You Don’t Have An Emergency Fund And Need Some Extra Cash?
While it is always best to prepare for the worst, there may come a time when you do struggle to make ends meet. It is important to always stay calm and know that there is always a solution for a short term cash flow problem. If you are ever in need of a cash injection to see you through until payday, then why not consider a short term loan? A short term loan could make all the difference for those needing to receive a lump sum of money into their account quickly, in order to pay off an emergency debt or make an unexpected payment. A short term payday loan, when used wisely and sparingly, can make all the difference when it comes to balancing the books and keeping you out of the red.
Generic advice is not a service regulated by the Financial Conduct Authority.