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Emergency Funds: What They Are and Why They Matter
An emergency fund is money you set aside to cover unplanned expenses that come your way.
Prepare for Life’s Unexpected Expenses
Think of your emergency fund like insurance to shield you from money mayhem. You don’t ever plan on using it, but having money in the bank provides a safety net for your finances and protects your peace of mind.
An emergency fund can also keep you from turning to alternative sources of quick cash. Borrowing from family and friends can stress relationships, charging a credit card can cost you interest, and taking a payday loan comes with interest and fees. An emergency fund is your key to avoiding these less-than-ideal options.
These are just a few of the surprises that can strain your finances if you don’t have an emergency fund:
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Medical emergency
A medical issue in your family, including any pets, could mean a trip to the doctor, dentist or veterinarian. -
Broken cell phone
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Appliance repairs
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Permanent Change of Station (PCS)
Out-of-pocket expenses can quickly add up and may not be reimbursed. -
Loss of spouse employment
Loss of spousal income due to a PCS can be a significant blow to the family budget. -
Replacing your vehicle tire(s)
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Deployments
Costs associated with home repairs and yard maintenance that your spouse would’ve taken care of. -
Unexpected travel
Military life often means living away from family which requires travel for things like funerals and weddings. -
Government shut-downs
Military pay could be held up temporarily. -
Separation from service
It could take several months to find a new job. A financial cushion gives you time to find the right job instead of taking the first one that comes your way.