Life is full of surprises, and sometimes, these surprises can end up costing you a lot of money. This is why you have always been told as a kid growing up that saving a penny for a rainy day is a good idea. Imagine finding yourself in one of these expensive accidents and you don’t have an emergency fund to use to pay for it?
What is an emergency fund and why do you need it? An emergency fund is something you save up and use when an emergency arises. Ideally, this fund should be at least worth three months of what you regularly spend on your living costs. So if you spend around $3000 a month on food, clothing, utilities, and other stuff, your emergency fund should be around $9000. If you are not living alone and have people depending on you, your emergency fund should be at least double that amount.
Emergencies That Can Cost You Money
Not all emergencies can cost you a lot of money, but those that do may require you to dig deep into your emergency fund. More-often-than-not, these emergencies disrupt the flow of everyday life and end up with you losing days at work. This means you will have to cover the cost of the emergency plus operate at a deficit for that month because of what happened, which basically makes an emergency fund even more of a necessity.
What are the emergencies that can cost you money? Here are some of them:
When your car breaks down or when you find yourself in fender-bender, this will require you to have your vehicle fixed or even replaced. When this happens, you usually fin
d yourself running late for work and a reduction in salary for that day, or worse, a day off work. Even the safest drivers in the world can find themselves in an auto accident and everyday usage can result in vehicular damage of some sort.
Car problems can set you back a few hundred dollars to a few thousand, depending on the type of problem you find yourself in. Even with insurance, some of these may require you to spend a bit of money in fees and such. The usual cost people find themselves saddled with when they encounter car problems that result in the need for repairs and sometimes towing is around $3,000.
Home repairs and maintenance
In your house, anything can go wrong and when it does, it can also cost you money. The cost usually depends on how big the problem is. For example, if your HVAC suddenly conks out and you need to have it fixed, you can end up spending between $300 and $500, depending on what part needs replacing and how long it takes to fix it. It will cost even more if you need to replace the system itself, which can run you a bill of somewhere between $6000 and $12000, depending on how big your home is.
Home repairs can and will cost you a lot of money, and if you don’t have enough money saved up for it, you might end up with a home that has a leaking roof, a broken furnace, drafty windows, and other similar issues.
This is one of the biggest emergency expenses that you can find yourself in and one of the scariest. Even with insurance, you can find yourself spending a few thousand dollars on things that are not covered by your provider. It is even worse when you don’t have health insurance and will need to spend as little as $150 to as much as $3,000 for a small trip to the ER.
Medical emergencies include dental issues, minor aches and pains, and more serious ailments that require hospital care and surgery. Sometimes, accidents that land you in the hospital can cost you up to $20,000, depending on the severity of your injury. If you are diagnosed with a serious illness like cancer and you don’t have health insurance, you might find yourself shelling out between $11,000 and $40,000 for the therapy that is needed to get it under control.
Also on this list of things that can cost you a bit of money is when your fur babies need medical care. If you don’t have money saved up for these emergencies, you might end up saying goodbye to your pet. If your pet is involved in an accident, you can expect to spend between $300 and $8,000 in medical bills, depending on the severity of your pet’s injuries. If it needs surgery or is giving birth via C-section, you will need to pay around $3,000 for this.
When your pet bites someone, you might find yourself on the sticky end of a lawsuit. This can cost you around $30,000 in settlements. Since you own the pet, you are liable for what it does. If you have homeowners insurance or renters insurance, you are covered by it for such incidents. If you don’t have insurance, you can expect to pay for these settlements yourself.
Sudden and unexpected travel
This is usually something that comes up when there is an emergency in the family or when a close friend needs you. Things like this can burn a hole in your savings. While you might want to opt out of traveling without planning, when a beloved family member is in the hospital or dies, it is an unavoidable expense.
Traveling suddenly and without taking advantage of the cheaper rates you can get form advanced booking can cost you somewhere between $500 and a few thousand dollars, depending on where you are traveling to and from where. If you need to book a flight immediately, it will cost you a lot more than it would if you booked weeks or months in advance. You will also need to factor in the cost of rental cars, hotel stays, meals, and other incidentals.
The Bottom Line
As you can see, the need for an emergency fund is truly there and saving for it should always be part of your day to day life. If you can save more for these probabilities, try to do so. It will help you have more than enough when such emergencies happen. If none of these things occur, you end up with huge savings that you can use elsewhere.
It might also be a good idea to invest in insurance for most of these scenarios. For a small amount every year, you can save yourself the stress and the huge costs of associated with these emergencies. All you need to do is to find the right policy for your different needs and get yourself covered. It also does not hurt to have a nest egg, not just for such eventualities, but also for needs and wants you might have in the future.