Having an emergency fund feels like dead money. With savings and money market accounts earn close to 0.00% interest, what’s the point?
If life always went as planned, I’d agree. It doesn’t though and when the unexpected happens, your emergency fund may save you from being derailed from your financial plan.
Leaving work not long ago, I backed into an SUV. The lady driving honked in warning but I was distracted. The result? A lovely dent in my rear bumper that will cost around $2,000 to repair and $700 in damage to her SUV. Oops.
My emergency fund, gave me something very important…..options. I chose to pay for the repair of the other vehicle and live with my dent to remind me to be more careful.
Without an emergency fund, this or some other calamity (injury, job loss, home repair, etc.) would have left me with only bad choices:
- borrow money to pay for the expense (pay interest and sacrifice future lifestyle)
- Save to pay for it (sacrifice current lifestyle)
- Not fix it (sacrifice quality of living)
- Not pay the expense (transfer sacrifice to other party)
This was a minor mishap, but it’s just these types of events that could derail your financial life. The financial flexibility that having an emergency fund provides is priceless.
QUESTION: How has having an emergency fund helped you when life happens? Share your examples via twitter Tweet to @roger_whitney to help others.