There are many reasons why people save money. One of the most ignored aspects of saving is the emergency, yet every now and then, we encounter unexpected situations. Imagine suddenly finding yourself in an accident and you spend a number of months in a hospital. When this happens, and you can no longer work, you need an emergency fund to keep you going. Medical issues can bring you down financially even if you have a medical plan.
Emergencies can be large or small depending on the gravity of the situation. When you are busy, you tend to forget special days like birthdays. This may come at a time when you are broke. It is disappointing to miss out because you do not have money to buy a present. Supposing you have a car breakdown at a time when you need a car to run errands? Where would you start? An emergency fund helps you answer these questions.
The Benefits of an Emergency Fund
An unexpected situation refers to conditions that require immediate attention. This is a crisis, which you must solve immediately. Since it is an unforeseen situation, you need quick action against it. Countering its effects calls for smart planning. When this need involves finances, it may demand assistance. Borrowing money is not always the solution because it does not feel good. In order to prevent awkward or embarrassing situations, it is advisable that you set aside some extra money for such cases.
Emergency savings will help you to manage long-term and short-term events.
The following are more benefits of such savings:
- Reduces dependency on people
• Helps to manage an incapacitation during medical disability
• Prevents financial deadlocks
• Facilitates for transition periods
• It boosts other plans like a medical fund
• Allows for calculated spending
• Helps in time of loss
• It gives you confidence in life
One of the most disappointing facts about life is that no one knows exactly what tomorrow will bring. Situations, which arise from the blues, can either add value or incapacitate you forever. In as much as opportunity knocks, so does crisis. You could be fine now but in a split, second things change. Nobody wishes for the worst in life but it pays to have plan B for when things go very wrong.
What Could Possibly Go Wrong If you Fail to Plan?
There are people who have run bankrupt because they did not plan for the unforeseen. If you take loans and are unable to pay, you might lose everything when the bank takes your major assets. In this case, it feels safer if you have some money to get you back on your feet. Making calculated moves with finances saves the day.
If you are the sole breadwinner in the family things get worse in an economic crisis. Putting your loved ones in trouble lowers your dignity. Losing a job when you least expect it is one of these awkward circumstances. Life does not wait for you to plan. Your children need to go to school, they need to eat, and have basic needs. An emergency fund helps you to pay rent, start a business or manage your bills before the next source of income comes by.
Everybody is prone to extreme situations like these. It affects those on a regular income like the employed and business people are at risk. Emergency crisis management for people in business covers material and financial losses. Losing your business to uninsured causes like theft could lead you to a fresh start. So how do you get started without savings? You need some contingency funds to help you make some repairs.
How Much Should I Save for an emergency?
Saving for strange situations is not easy. It calls for commitment and planning. If you want to succeed, you need to set a goal. Start small and then grow depending on your specific expectations. This strategy covers your family, property and personal care. You can save on a daily basis, weekly or monthly. It all depends on your intuition.
A journey of a thousand miles starts with one step. Even Rome was not built in a day. Start with what you can manage every day and watch it grow. $1 in a day becomes $30 in a month, and $2 matures to $60. You could even teach your children to save along in the little piggy banks. Private financial solutions come from personal money tactics.
Moderate Emergency Kit
Often times you spend money without planning to. If you sit down and calculate how much you spend on things you do not need, you will be shocked at how much it adds up to. If you put together this money and add to your daily savings, you have a substantial amount of savings. Do not be surprised if this adds up to $1000 or more. Use this money to buy a new car, repair your home, pay off a mortgage, or replace your wardrobe.
Large Emergency Savings
Saving for life, disability or business requires a good amount of money. This is money kept over a long period but it could also grow within a short time. Preparing for life-threatening situations is a challenge is you do not have a roadmap. However, if you understand its benefits, you will sacrifice in order to have a major account for it. Failing to plan is planning for failure. Reduce the impact of life’s grievances by managing the situation. This will give you a better response rate and capability. Having money in your pocket makes it bearable all the time.
Whether your savings are small, medium or large, emergency saving is important. It lowers the risks of plunging into further crisis and it provides alternative finances. This is a clever way to survive in a fast moving world.
Finance experts will inform you that saving an emergency fund and when to use it-should be your major concern. It depends on your ability and smart thinking. Online links like squarepennies.com have resources on how to do this.