An emergency fund is a certain amount of money which is set aside and always kept available to use in case it’s needed.
This is money that allows us to assume incidences in our personal finances without resorting to savings in the medium or long term capacity, or of course to other financing elements such as cards or personal loans.
The emergency fund is an essential tool when we really want to introduce the habit of saving constantly in our lives.
Do you have money saved and do not know what to do? In this article we give you ideas to make the most of it
Why you must have an emergency fund
The emergency fund will allow you to get through situations without damage in your finances that otherwise you would have had to cover by taking out loans or using credit cards. So, for example, in the event that you need garage door repair immediately, you won’t have to take out a loan.
The first of the examples is easily understood, when for example we have to deal with damage in the home that involves an unexpected expense, for example garage door repair, if we have that money in a separate fund it will save us the costs of financing it at generally high interest rates both in credit cards and in personal loans.
Apart from the fact that it saves your financial security, it is also easy to visualize the benefits of the emergency fund. Let’s suppose that we do not have an emergency fund and we must find $1000 for a major repair, but we do have certain savings or investment products such as pension plans or investment funds where we put our money. Withdrawing money from pension plans is very complicated and in this case would be impossible unless we met some of the parameters by which the rescue can be made.
Overall, it’s just much better to have an emergency fund. You won’t have to go into debt or harm your pension or other savings plans in the event of an emergency occurring. There’s no better peace of mind than having an emergency fund.