Why an Emergency Savings Fund is so Important
Many people fail to prepare for the future. Financial security is important for every person. An emergency savings fund can help individuals look forward to the future without worrying about being unprepared for unexpected expenses.
Having an emergency savings fund is critical to the financial security of your family. Learning more about this type of fund can better prepare people to start saving if they have not already done so.
Emergencies Will Inevitably Occur –
Everyone has a certain set of fixed expenses each month. These bills have to be paid on time to retain excellent credit. Some of these expenses include a mortgage, health insurance, life insurance, car payments, car insurances, home utility bills, food, and automobile gas. Let’s say that a person is living week to week and has no savings at all or has only a very minimal amount in a bank account. If this person suffers a job loss, this could be catastrophic.
That’s why no matter how hard it is to save; an emergency fund must be saved in order to carry a person or family through those tough economic times when not enough income is coming in to pay all the required expenses. People can lose their homes to foreclosure. Renters can be evicted and have no money to stay at a hotel or to re-rent another home. Shelter is a must, as is food, and paying for prescription drugs, and keeping up all of the insurance policies and car payments, otherwise people can have their cars repossessed if they do not make the payments.
So it’s imperative to save a separate emergency fund. One way to do this is to cut back on nonessential items such as eating out every day or buying fancy clothing that people don’t really need. Keep a journal of the items you cut out, and put that money into a savings account each week. As the account starts to grow, you’ll probably start to feel a real sense of accomplishment, and you probably won’t even notice the things that you cut out of your spending.
Paying down debt is also a great way to help grow your savings. As you pay off your loans and credit cards, the money you used to put toward these bills can be set aside in savings where it will grow for you year after year.
How Much Should Be Saved –
According to most financial experts, it’s wise to save at least six months of net living expenses in an emergency fund. So if a family requires $3,000 a month to pay all of its expenses, then it should strive to accumulate $18,000 in an interest bearing emergency savings account. This sounds like a lot of money, but if a certain amount is put away on a steady basis, then this financial consistency will be rewarded with a quick accumulation of that essential emergency nest egg everybody requires.
Reasons Why An Emergency Fund Is Critical –
Families have certain bills that they are responsible for each month. Many families live on a weekly or bi-weekly paycheck without any savings left over after paying the monthly bills. If the working individual gets let go or becomes ill or injured, he or she will not be able to provide for his or her family. This could be tragic, so it’s important to ensure that the family is financially secure for future emergencies.
To ensure the financial future for a family, an emergency fund is necessary. No one is able to save enough money to pay all of his or her expenses if they go through a rough economic time, injury or sickness. They stand the chance of losing their homes, vehicles, insurances and other necessities. Therefore, it is essential that each individual set up an emergency fund to ensure the money is available when it’s needed.
How To Save For An Emergency Fund –
There are several things an individual can do to save money. One way is to start cutting back on things that are not needed. For instance, an individual can stop eating out each day or buying an unnecessary item for the home. The money saved can be placed into a savings account each week. The account will continue to grow as you continue to cut out unnecessary spending.
Another way an individual can prepare financially for the future is to pay down his or her debt by signing up for a Debt Management Program with a credit counseling agency. With less debt, there will be more money to add to the savings account. Each year the savings account will grow as more money is added to it.
Families should try to spend money sensibly. For instance, a house or automobile should be within their spending budget. For example, they should not try to buy a $250,000 home if their budget will only allow them to spend $100,000. By spending sensibly, they will not go into debt above their income, and this will allow them to have more money to put in the emergency fund.
There are many reasons an individual or family needs to plan for the unexpected. Medical emergencies, house repairs, auto repairs, and retirement are just a few of the reasons for having an emergency fund. At retirement, individuals will want to have enough savings to live comfortably. Social Security will not ensure them of having enough money to enjoy retirement. However, if they start now preparing for that day, they can look forward to their retirement.
An emergency savings fund is essential for an individual’s health. Living with the fear of not being financially secure for the future causes unnecessary stress. Stress can lead to many health issues, and health issues can lead to income loss. Therefore, a savings fund can help eliminate the stress and allow an individual to live a more peaceful and comfortable life.
If you need help getting your bills under control and would like to start saving more money today, contact the experienced credit counselors at Advantage CCS. We can help you get on a savings and debt management program that will allow you to spend less and save more.