It is always a good idea to have money in an emergency fund. You never know when something will happen.Without an emergency fund a hard time personally can become devastating financially.
At the beginning of the recession many people who had no emergency savings found themselves out of work with no warning. Because unemployment skyrocketed they were thrown into a large group of people who were also looking for a job. They could not have forseen how long they would have to spend without a job or income. Many of these people lost everything, including their house. Before, a family could get away with an emergency fund of three months of living expenses. Now, it is suggested you have an emergency fund that will last for six months of unemployment. Some estimates are as high as eight months. You may reason that many people get severance pay when they are laid off but severance pay is not a given, and since many companies went under people who were expecting a big check were left hanging. Then there is unemployment, but unemployment is only a fraction of what you were making in your old job, which if you are living paycheck to paycheck, or even with a little breathing room each month, this will not cover your bills. Also, many people found themselves out of work for over a year, if not more in some cases.
Because it is your primary way to get to your job, it is vital it stay in service. Without your car you would have a very difficult time earning the wages that pay for food and housing. Even if you have insurance if you had car trouble you would still have to pay a deductible, which is usually $500. This may not seem like a lot to some, but if you have no savings it can be very hard to find the money to pay the bill.
If you have pets, especially if they are getting up in age, there could be a surprise vet bill in your future. For an MRI alone it can cost you $2000. Surgery on a dog’s back can cost between $3000 and $6000. If you planned ahead and got the pet insurance for your older dog, you will still have a deductible. This is usually $500. On top of that the insurance company will only pay between 80% and 90% for the rest of the bill, so your costs can still be pretty high. And that is if you have a good insurance company. If you are turned down for any reason you will be saddled with the bill. If you decide that euthanizing the dog is in everyone’s best interest it will cost you around $300 on top of whatever they had to do to stabilize the animal.
Death in the family
No one likes to think of it, but almost everyone experiences an unexplained death in the family at least once in their lives. If you need to take a flight to go to the funeral, you will have to buy it last minute and that can cost hundreds of dollars. There is no insurance for this and most people don’t have hundreds of dollars left over each month in their paycheck. Also, you will have to miss work, which for many people means they won’t be getting paid for the days they miss.
The point of an emergency fund is that you never know what is right around the corner. If nothing happens then an emergency fund is great, not only for peace of mind, but for the interest it can earn you. There is no harm in taking money you would normally use on lattes or other extras, and put it in a savings account. When your family has an emergency and you can focus on the problem at hand instead of the debt you will incur, all those missed extras will be quickly forgotten.