Content may contain affiliate links.
You’ve heard of an emergency fund – it’s something we’re all told to put together at some point in our lives. Most people will be given this advice when they reach early adulthood, whether they’re a college student or someone who dived straight into the world of work. The general rule is that, as long as you have money stashed away to keep you safe on rainy days, life will always be more convenient.
But what should an emergency fund be used for? It’s not a catch-all savings pot that you can dip into anytime you like. It’s a genuine safety net that should be reserved for unexpected bills, big life events, and emergencies you couldn’t have possibly seen coming. And to break this down even further, it’s the kind of fund that should only be resorted to when there is no other option.
As such, here are four common times in life when you can turn to your emergency fund. Try to save this cash for these kinds of events only, and be sure to replace what you spent steadily and surely over time.
Hospital Bills
If you’ve ever had to take an unplanned stay in hospital before now, you know just how expensive the resulting bill can be once you come out again. You could end up owing thousands to the hospital, and even if you have health insurance, the deductible could still carry a hefty fee with it.
Legal Difficulties
Anyone can run into legal troubles, regardless of whether they’ve genuinely broken the law or not. An emergency fund can help to cover you at a time like this, and make it far less harmful to afford bail, pay the bills while you’re out of work during a probationary period, as well as pay for lawyer fees.
There are also ways to supplement your emergency fund while you’re dealing with legal difficulties. For one you can investigate Future Bail Bonds and have the price of bail taken off your back, even if just for the short term.
This will give you a lot more wiggle room in how you can use this fund at a time like this, and that’ll take a lot of pressure out of surviving the next few months.
Being Out of Work
Sometimes a job loss comes at the worst time possible. At a time like this, when you’re already in debt and trying to pay off three lines of credit at once, or you’ve just taken out a mortgage and now can’t afford the repayment, your emergency fund will swoop in and feel like a savior.
The cash in your emergency fund will be best put to use on the long-standing bills you’re already paying for, such as your heating and electricity, your weekly food shop, etc. That should then give you at least two to three months of time to secure another job and get renewable income flowing back into your account.
Home Repairs
We’ve all been through a sudden home repair that needs to be carried out ASAP. Whether the ceiling has fallen in or the bathtub is leaking through the floor and into the walls, or there’s been a burst pipe or a failing furnace and the house has turned icy over winter, you can’t live in that situation for very long!
Use your emergency fund to pay for the emergency repair callout, the cost of a hotel for a night or two, or to pay for any damage that your home and/or contents insurance does not cover. Remember, investigate the wording in these policies very carefully before agreeing to pay the premium for them!
Saving Up an Emergency Fund
Having an emergency fund ready to go is crucial to keeping life on the straight and narrow. Even if you can only pay for half of the hospital bill you’ve just been hit with, you still don’t have to touch your main account, impact your income, or take out a loan to cope. That’ll make paying off the rest of the cost a bit easier, and that kind of convenience cannot be understated in the current economy.
So, if you don’t have an emergency fund right now, it’s time to start saving one. Whatever you can manage to put away, be sure to do so for the next six months at least. That’ll give you some cash to work with when something shocking and unexpected happens, and you won’t be knocked sideways and unable to recover.