4 reasons to have an emergency fund

LOS ANGELES – October 5, 2021 – (Newswire.com)

iQuanti: Having a flat tire or taking a pet to the emergency vet can cost you money. And emergency reserves can be the difference between taking on debt for an unexpected expense and taking care of it easily. If you are thinking of starting a emergency fund, here are four reasons why you should have one.

What is an emergency fund?

An emergency fund is a dedicated savings reserved for emergency use. For example, you could turn to it to cover an unscheduled car repair, sudden medical bills, or job loss. There are so many uses for an emergency fund, and having one is essential in putting you in a stable financial position. A good rule of thumb is to save three to six months of living expenses, like rent, food, and bills, in your emergency fund.

Why you should have an emergency fund

An emergency fund relieves financial stressors associated with emergencies. Here are four compelling reasons why you should have an emergency fund:

1. You want to avoid getting into more debt

Often times, during an emergency car repair or medical situation, people turn to credit cards, online loans, or other sources of debt to cover costs. But having an emergency fund means you can use the money you already have on hand. Plus, since you don’t need to pay interest, you’ll save money instead of going into debt to cover emergency expenses.

2. You want a safety net if you quit your job

If you lose your job or decide to leave voluntarily, an emergency fund can give you time to choose a new job that you really enjoy. If these funds are not set aside, you may need to grab the first thing that becomes available. But the freedom and options that come with an emergency fund mean you can choose what’s best for you, not what you need to do to pay the next round of bills.

3. You are self-employed or have irregular income

If you run your own business or work on commission, your income can be unpredictable. An emergency fund can help you cover anything that might arise when you are expecting more money. It also gives you the freedom to try new things in your business or turn to a different strategy without worrying about the short-term financial implications.

4. You support a family

When you are just self-supporting and don’t have as many responsibilities, having emergency reserves may seem less important. But if you are supporting a family, it can matter a lot more.

As your family and your responsibilities grow, your emergency fund should grow with it. And having that money aside can give you the peace of mind that you can take care of and support your family financially, no matter what comes your way.

The bottom line

An emergency fund is a crucial part of any financial plan. And having one is essential for those with irregular incomes, who want to avoid debt, seek freedom of employment, or support a family. With the peace of mind that comes with an emergency fund, you can pursue bolder financial dreams without worry.

Note: The information provided in this article is provided for informational purposes only. Consult your financial advisor about your financial situation.

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