2020 was a year that underlined the unpredictability of life. The world was turned on its head and many people faced financial pressures and anxiety related to managing money and paying bills. Life doesn’t always pan out as you anticipate and this is why it’s so beneficial to have access to savings. In this guide, we’ll discuss some common reasons why you may need an emergency fund.
Losing your income
The vast majority of us rely on a steady income to cover mortgages or rent payments and put food on the table. If you were to lose your job or your income suddenly dropped, would you be able to manage? If the answer is no, it’s hugely beneficial to start putting money aside whenever you can and build an emergency savings fund. Even if you have a steady income and you’re employed on a full-time, long-term contract, there is always a risk of your financial situation changing. It is particularly beneficial to have backup plans in place if you are self-employed or freelance or you have a temporary contract.
There are all kinds of situations that can crop up that may result in you needing legal support or assistance. From buying or selling a house to finding a divorce solicitor, there are costs involved with hiring experts and going through legal processes. Nobody enters into a marriage thinking that one day they’ll need to hire a legal team to oversee a divorce but sadly, divorce is common. If you’re filing for divorce, it’s wise to ask people you know and trust for recommendations and to find out more about costs and fees before you decide which firm to hire.
Most of us grow up with ambitions to purchase our own homes but there’s no doubt that being a homeowner can be costly. While simple DIY jobs are often inexpensive, you may find yourself in a situation where you are advised to spend hundreds or even thousands of pounds on your home. Roofing issues, dampness, electrical problems, structural damage and faults with the heating system can all be costly.
Most drivers fear abnormal noises or unusual odours. Unless you drive a brand new car, there is a risk of repairs costing a substantial amount of money. If you need your car for work or you rely on a single vehicle to take your children to school, for example, there is often no option but to pay for the repairs needed or swap the car. You might find yourself needing instant access to cash that you wouldn’t normally have without your emergency fund.
Life isn’t always rosy, and often, when there are bumps in the road, getting back on track involves spending money. Nobody knows what is around the corner and that is why it’s important to try and save when you can and create an emergency fund. Even a few hundred pounds could make all the difference if you find yourself in a situation where you need cash quickly or unexpectedly.