Emergency funds | Why you need to save for it

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Emergency funds | Why you need to save for it


One very important aspect of personal finance planning that I learnt from my parents was having an emergency fund. Not only will it help you cover for any unexpected major expenses but it also allows you to enjoy life better knowing that you are prepared for these unexpected financial emergencies. Start this habit early and when an emergency does arise, you will be thankful that you set aside this money. I learnt this early on in my life and my fund is the place from where I have got the money needed when I found myself short - whether it was the unexpected medical bill few years back or more recently when our family car had to be written off.

I have some relatives and friends who do not believe in saving money for emergencies. Their concept is different from mine as in they believe in living in the moment and facing life's unexpected problems as and when they arise. While I respect their way of living their life, I still feel that an emergency fund is essentials.

There are so many scenarios where one might need emergency money.

- Unexpected and urgent medical treatments: This is my number one concern. Although we have health insurance and comprehensive travel insurance, at times you need to pay the bill first and then claim it from the insurance company.
- Forgotten bills: While this has never happened to me, my brother has faced this scenario. Somehow he missed the yearly payment for a service once but thankfully he had access to emergency money when he eventually realised that he had a big payment to make.
- Losing your job or if your hours at work are reduced, you might end up being short on funds until you land a job again.
- Child/pet emergencies.
- Relocating to a different city or country unexpectedly. This could be due to any reason, but the move will put a burden on your finances. I am saying this based on my friend's experience when they relocated from Cornwall to Australia recently. So many unexpected financial obligations. It was a difficult time for them.

Anyways, the list goes on! There are so many other scenarios where you might need emergency cash. So don't wait until an emergency to start this fund. Start it now. You will be so glad you did.

And while the fund that you put aside will pay for most emergencies, they are not the solution always. At times you may have to end up taking short-term loans. There a number of companies like Cash Lady that offer short-term loans. You could look at them. But please do note that such loans usually have high interest rates. So, evaluate if you can repay on time and then take any decision.

I would love to hear your strategies for facing unexpected financial emergencies. Leave your comments below.


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