Emergency fund is now a common term in the finance world. To give you an idea about what is an emergency fund, here are some examples how different personal finance bloggers define the words “emergency fund”.
What is an emergency fund?
“An emergency fund is an easily accessible stash of money for use only in case of emergency. It is not to be used to buy a new car. It is not to be used to buy a new PlayStation. It is not to be used to remodel your bathroom. It is for use only in case of emergency.” – JD of GetRichSlowly.org
“An emergency fund is for emergencies, and an emergency is an expense you had no way of anticipating.” – Joan of ManVsDebt.com
“An emergency fund is basically a stash of cash that can bail you out in case of an emergency. – Lance of MoneyManifesto.com
Now that you know what an emergency fund is and what’s its real use, let’s discuss if you really need one or not?
Is having an emergency fund a need or a luxury?
Having an emergency fund is optional in today’s world, right?
You may not even have one of your own, and you’re still living your life without any other problems besides your mortgage, your credit card debt, or just your husband being stupid again.
Maybe you are different, maybe you don’t have any problem at all. You have a great job, your own home, and a great family. You may even have a dog that has its own home.
So, why should you even bother getting yourself an emergency fund when most see it as a luxury than a need?
Having an emergency fund shouldn’t really be considered as a luxury, it should be considered as a NEED. Why?
Wait. Let me ask you more questions.
What if you lose your job? What if your child gets into an accident?
What if your house got burned?…
…What if your dog needs medical attention ASAP?
That’s a lot of what if, right?
You don’t know what’s going to happen in the future, and that’s why having an emergency fund is a need. A big need actually.
An emergency fund can save you from getting in debt. You might think that borrowing money is not that bad after all because everyone you know do this every time.
Well, you should think again, and look at these statistics:
- Overall debt levels rose at the fastest rates seen since 2007, according to a study conducted by the Federal Reserve of New York.
- 28% of Americans have more credit card debt than they have in their savings account
- 46% of all Americans carry a credit card balance from month to month
- Overall, Americans are carrying a grand total of $798 billion in credit card debt
After reading all that, are you still doubting the importance of having an emergency fund?
If you think you can handle anything that might happen in the future, then you do nothing and just continue living your life like before. If you want to avoid getting into debt when something unexpected happens and feel more secured, then you’re going to build up your very own emergency fund now.
Do you have your own emergency fund? What made you build it up?