3 Reasons Why You Need An Emergency Back-Up Fund
The word emergency puts you on your toes and that is what it should be. The emergency backup fund is money you keep aside in outside your savings in case of a need or crisis and of course unplanned occurrences do happen. In financial circles, it is advised that you save 3-6 months income of your current salary.
This money should be outside your retirement savings, insurance contributions, for school, or saving towards planning to buy a car. In most climes car accident do happen and job losses do occur. Rooftops do go off. All these can take place and if any of these pops up what happens?
Why do you need an emergency backup fund you may want to ask. Sometimes some unprepared things do come up when you least expect and so the need to be prepared for such incidences.
1. Unexpected Health Challenge is one of such examples that can just come up without prior notice. Á surgery, a tooth removal for a child.All these can take place and if any of these pops up what do you do.In this part of the world particularly in Nigeria, health insurance is not so popular, any time there arises a need for a sudden surgery due to say a broken leg or an emergency cesarean section and there is no cash reserve somewhere to fall back to this becomes a problem.
2. Car Repairs is another reason to have an emergency backup fund. A Broken screen or window, burst or expired, a tire that needs fixing, shaft or any part of the car might require a change. You might say you don’t own a car but it could be a bike or bicycle and all these need an immediate attention and if there is no money on the ground it creates tension.
Cars tend to need regular maintenance and the roads are not so good which tend to quicken the deterioration of the vehicles. Most times this leads to encroaching into your savings but with an emergency backup funds, this is eliminated. Therefore the need for a separate account for this is a necessity.
Any means of transportation is very important to the families more especially when there are children to take to school and back. Imagine a situation where you have to do school runs with your car and also use it to the office and an accident occurred or you the car simply refused to start and there is no money for repairs.This can be quite devastating and so you must do all within your power to have a backup fund.
The availability of a means of transport reduces the stress of jumping from a bus to a taxi. When it is no longer available, this becomes an issue. Even though some emergencies can wipe away all you have been saved but the joy is that you will be saved from having to go asking for financial assistant from people.
3. House Maintenance like roof repairs, replacement, leaking pipes, bath replacement and other household maintenances requires big money. Such normally needs all the urgency to carry out the repairs and when there are no backup funds, sometimes disasters follow.
Most times when you move to a new house, you discover some repairs that should have been carried out but were left undone. This you will discover most time after moving into the house and by that time, the thought of moving out will not be your option. Most time the agents or landlord will not available to carry out any further maintenance and you are left with bills. If there are no savings on the ground then, the situation becomes unpleasant.
The emergency backup fund is just as its name implies. The savings is not meant for feeding, nor for throwing parties, or to pay school fees or to rent an apartment. It is for the unexpected happenings which tend to occur when least expected.
Therefore it is very important that you have at least 3-6 months of your income in savings to serve as emergency funds to guard against unplanned incidences. Do you have one? If not what is stopping you from having one.Work towards having an emergency backup fund.