Many people think an emergency fund is a waste of time and money but no matter how prepared you are financially, life has a way of throwing you curve balls when you expected the least. It’s because of those unexpected expenses that many financial advisers suggest keeping at least three months of expenses saved up somewhere in a savings account.
Losing your job
Job loss is the number one reason to have an emergency fund. If you lose your job and struggle to find another one quickly, it could be detrimental. But with an emergency fund, you could live off your savings until you find another job and you don’t have to go for the first company willing to hire, you can find a job that suits you.
Even if you have a medical aid, a trip to the emergency room can create severe financial stress. There are always co-payments that the medical aid doesn’t cover even when it comes to planned surgery or dental work.
Emergency pet care
Your pet is part of the family, and you can easily accommodate regular expenses of pet ownership. But what happens when you have to pay thousands of Rands if your cat or dog needed surgery? Would you be able to cover the expenses from your monthly budget? Not many people can afford emergency pet care and to put down a pet for no good reason isn’t an option.
With the condition some of our roads are in, flat tyres are an everyday thing. Also, cars break and need to be fixed and what’s worse than a surprise car repair bill? With a sufficient emergency fund, you wouldn’t have to stress about it, and you could even afford a temporary rental car.
Burst geyser? You have insurance to cover the significant expenses, but insurance doesn’t cover everything that could go wrong. And even if it does, there will always be a copayment.
Unplanned pregnancies happen all the time, and with an emergency fund, you’ll be in a position to prepare for your new baby as well as cover the bills if your job doesn’t offer paid parental leave.
Death in the Family
When a close relative or friend passes away in another part of the country, an unplanned trip to the funeral can be extremely costly. Not only will you have to pay airfare or petrol expenses but you might also need to pay for accommodation during your stay.
All of these things can cause an otherwise stable financial situation to quickly collapse into chaos, forcing you to use your credit cards.
Much of this can be minimised by simply maintaining a cash emergency fund. And when you’ve used some of the funds, make sure you put it back.