Why It “Pays” to Save for Emergencies
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With many of us barely living within our means, saving for emergencies seems to be a nice thing to do, but actually impossible in practice.
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Saving for emergencies is a crucial part of our personal finances, but it’s important to note how it actually pays off.
Here are some major reasons why you should start saving for emergencies, regardless of how little you have:
Reduces Stress and Anxiety
Financial emergencies are emotionally draining as well as financially exhausting.
Whether you are experiencing job loss, expenses arising from accidents, or costly home repairs an emergency fund provides an all-important buffer, so you don’t have to worry about those excessive costs when disaster strikes.
Money is ultimately one of the root causes of anxiety for so many of us, which is why an emergency fund, however, little it may be, can benefit us all.
Prevents Poor Decision Making
If you experience a financial emergency, you can feel the pressure that can impact your decision-making prowess.
Because of the stress we’re under, we can make impulsive decisions that aren’t in our best interests.
For example, if you are experiencing a problem with your home like a water leak and your finances are very constrictive, you will try to find the cheapest plumber available.
However, this doesn’t necessarily guarantee quality service.
Savings means that you can make better decisions upfront and find a contractor that comes highly recommended, rather than you having to determine what you can realistically afford in the moment.
This is where having additional insurance policies can give you that extra piece of mind.
Lots of people look at insurance policies as an unnecessary expense when it offers complete coverage, but this is where you could benefit to place all your savings in a solid insurance policy.
Just make sure that you are aware of what the policy does not cover.
Prevents Borrowing
Apart from loans and credit cards, having emergency savings means you don’t have to dip into retirement accounts or other savings that can have long-term consequences.
This “robbing Peter to pay Paul” mindset is not going to help in the long run.
An emergency fund is there so you can use it and not regret your financial decisions 20, 30, or 40 years down the line.
We can believe that if we borrow from our other savings this will bypass any additional interest when it comes to repaying things like credit card debt, but you will feel the personal repercussions of this approach.
It’s the Best Safety Net
Whether you lose your job or experience a natural disaster, it is the best safety net you can have.
The financial cushion for emergencies will give you a better chance of weathering economic downturns and peace of mind.
It is something that we all think would be nice to have, but the biggest issue for many people is thinking that we don’t have the money to set up an emergency safety net.
We think that it is a huge amount of money but the reality is no matter how little you have, putting something towards an emergency fund will be an amazing starting point.
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