While most of us know the importance of saving money, we may not know how to save for unexpected moments in life. To do this, you should consider building an emergency fund, which can be used to cover expenses for unfortunate circumstances that can't be easily predicted. What do such circumstances entail? Are there others that are deemed less appropriate? Here is how you should, and shouldn't, use emergency funds, as detailed by Robert Jain.
One of the ways to use an emergency fund, according to reputable names in finance like Bob Jain, is in case of a medical emergency. Let's say that, for the sake of argument, that you suffer a broken leg. You may not have insurance, which means that your medical expenses will be considerably high. An emergency fund will allow you to cover most, if not all, expenses, depending on how long you've built this account for.
Another reason to use an emergency fund is in case of an auto accident or mechanical difficulty. Even with insurance, you don't want to have to deal with the headache that comes with repairs from a body shop. Furthermore, if your car is perfectly fine but suddenly starts to break down, you'll have to pay as well. In situations like these, it makes perfect sense to build your emergency account ahead of time. The earlier that you do so, the better off you'll be.
What are some of the ways that an emergency fund shouldn't be used, though? Let's start with using the savings for luxuries that, simply put, aren't needed for day-to-day life. If you already have a laptop that performs all the actions you need it to, do you need a brand-new computer that you may not be able to afford? You may feel compelled to dip into your emergency savings but understand that they're meant for more important purposes.
You should also know that emergency fund savings aren't meant to be used to cover student loans. While these loans can be difficult to pay off, there are ways to help yourself without dipping into the aforementioned fund. If you have a part or full-time job, your savings should be diverted to your student loans, ensuring that they're paid off sooner. By following through with this simple action, you won't have to touch your emergency fund.
One of the ways to use an emergency fund, according to reputable names in finance like Bob Jain, is in case of a medical emergency. Let's say that, for the sake of argument, that you suffer a broken leg. You may not have insurance, which means that your medical expenses will be considerably high. An emergency fund will allow you to cover most, if not all, expenses, depending on how long you've built this account for.
Another reason to use an emergency fund is in case of an auto accident or mechanical difficulty. Even with insurance, you don't want to have to deal with the headache that comes with repairs from a body shop. Furthermore, if your car is perfectly fine but suddenly starts to break down, you'll have to pay as well. In situations like these, it makes perfect sense to build your emergency account ahead of time. The earlier that you do so, the better off you'll be.
What are some of the ways that an emergency fund shouldn't be used, though? Let's start with using the savings for luxuries that, simply put, aren't needed for day-to-day life. If you already have a laptop that performs all the actions you need it to, do you need a brand-new computer that you may not be able to afford? You may feel compelled to dip into your emergency savings but understand that they're meant for more important purposes.
You should also know that emergency fund savings aren't meant to be used to cover student loans. While these loans can be difficult to pay off, there are ways to help yourself without dipping into the aforementioned fund. If you have a part or full-time job, your savings should be diverted to your student loans, ensuring that they're paid off sooner. By following through with this simple action, you won't have to touch your emergency fund.
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For additional fiscal assistance, kindly consult Bobby Jain.. This article, The Best And Worst Purposes For Emergency Funds has free reprint rights.
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