Why you should start saving for emergencies
Saving for emergencies is, and should be, a top priority for every American. Maintaining an emergency savings account may be the most important difference between those who manage to stay afloat and those who sink in debt. That’s because keeping $500 to $1,000 of savings for emergencies can allow you to easily meet unexpected financial challenges such as:
- repairing the brakes on your car;
- buying your child a new pair of needed shoes;
- replacing a broken window in your house;
- paying for a visit to the doctor when your child has the flu;
- covering the dental expense of filling a painful cavity;
- paying for a parking ticket; or
- flying to visit a sick parent.
The emergency fund not only provides you with the money to pay for these expenses, it also gives you the “peace of mind” knowing that you can afford these types of financial emergencies. Not having an emergency savings fund is one of the reasons many individuals borrow too much money at high interest rates. For example, by saving for emergencies, the twelve million American adults that use payday loans annually would probably not have to take out eight loans of $375 each per year and spend $520 on interest (Pew July, 2012 Study).