5 Valuable Benefits of Having an Emergency FundOctober 29, 2020
Did you know that more and more South African households are living from paycheck to paycheck? This is according to a report conducted with about a thousand families living in major cities in South Africa. The report revealed that only 30 percent of respondents surprisingly have an emergency fund. Another survey also showed that if South Africans were to lose their income, only about 19 percent would survive for the following three months.
In this article, we will share five valuable benefits of saving up for emergencies and why you should set up an emergency fund for a rainy day:
1. Zero debt or debt control
One way to achieve financial liberation is to aspire to have zero debts. It’s always better to have an emergency fund to source money from in case of emergencies than borrowing from other people or applying for a loan. Sure, debts are inevitable as you are bound to be dealing with them all your life. For instance, you can’t get away without using a credit card, which is a form of debt. However, it helps to set aside money for your emergency fund as it gives you full control and won’t leave you in financial distress.
2. Buffer against irregular income
If you are working for a company or own a business, it makes sense to save up for the rainy days because it’s not always every day that you are financially stable. For instance, the COVID-19 crisis has put lots of strain on people’s finances. Some don’t get to work, while others have to stop their businesses due to government restrictions. If you are a freelance or contract worker, it is all the more necessary to have a fund as a buffer for your irregular income.
3. Financial assurance after a job loss
There is nothing more heart-wrenching than to lose your job. If you haven’t set aside money or don’t come from a wealthy family, you will start to wonder how you’ll get by for the following months. For instance, the COVID-19 outbreak has led some companies to lay off some workers due to their budget cuts. If you are one of those who have recently lost your job, it can be quite difficult to navigate life for the next few months. If you have saved up money, that will make a lot of difference!
4. Fund for home repair and maintenance
Some households make a deliberate effort to save up money for future expenses. One reason to set aside money is for future home repair or maintenance. The thing is, your HVAC system, appliances, and other household items need to get inspected and maintained regularly. This is because some vital units may give up after years of usage, leading to various costly repairs. If you have saved enough money, you won’t have a problem dealing with these.
5. Financial protection from potential medical expenses
When you or one of your family members gets sick, it isn’t a major financial headache if you only need to have a doctor’s checkup. However, what if you’ll need to get some lab work and imaging tests done? What’s worse is if you need to get some medical treatments and procedures performed to alleviate the medical condition. If you don’t have health insurance, it can be such a financial burden to take care of these expenditures. Nevertheless, if you have set aside money for your emergency fund, you’ll be able to handle this medical situation and pay for all the costs involved to get well!
Setting up an emergency fund isn’t easy, particularly if you have a meager income. Yet, it makes a significant difference if you make it a habit of setting aside money and having the discipline to do so. As outlined above, you’ll be able to take advantage of zero debt or debt control, buffer against irregular income, financial assurance after a job loss, fund for home repairs and maintenance, and financial protection from potential medical expenses. If an emergency situation arises, it’s better to have something to rely on than be sorry!
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