Why Having an Emergency Fund is a Survival Tactic?

In 2009, you should not be surprised if the U.S. sets an all-time record for jobs losses in one year. Some people will lose their jobs because of personal incompetency, while others will become victims of budget cuts. Regardless, many people are going to be looking for new jobs, and not by choice. Therefore, having an emergency fund has become more important than ever.

During rough times, some individuals decide to change their spending habits. Many times, these individuals become savers, in the midst of economic and financial turmoil, and give up their lavish spending habits. Unfortunately, many of these individuals wait too long. Instead of starting an emergency fund beforehand, many people only create an emergency fund after an unforeseen expenditure requires their immediate attention, such as a broken window or tax lien, which may drain their entire savings.

If you already have six months of income saved, then class is dismissed. Otherwise, there is more to cover in this financial lesson. Your emergency fund should be made of fairly, liquid assets. Cash on hand, a savings account, checking account, and money markets are all examples of liquid assets. You do not want to use your credit card as an emergency fund or a bank CD that will penalize you for an early withdraw. Your ideal emergency fund should not cost you money to withdraw your own money; for this reason, you need to avoid commissions, credit card charges and withdraw penalties, when accessing money from your emergency fund.

Having an emergency fund is a survival tactic, for accidents do occur on a daily basis. And you must be financially prepared for these unforeseen accidents. Otherwise you are not only risking additional damages to the object that needs repair, but also your credit could be damaged if you are late paying your other bills because of this unexpected expense.

Do not be reactive in the creation of your emergency fund; be proactive, instead, by starting one today!