An emergency by its very nature will strike at the most inopportune of moments. And the greatest fear that tags along with an emergency are the lack of funds. It is to overcome and be prepared for such unforeseen challenges that one should have a substantial amount of savings in place.
Warren Buffet had once famously quoted: “Savings in not what is left after you spent on your needs but it is the first investment you make before you spend on anything else.”
In today’s time of financial uncertainty and extreme competition, health and wealth are both victims. And after a point in time, there comes a situation where falling back on reserves, however unwise that would be, become a necessity. Let us list a few of them to see why people need and emergency fund or in other words, a saving.
- A loss of a job is a reality. Companies will restructure, downsize or maybe right size and the first casualty will be you. What would you do in that case? Jobs will never come on a platter and hence expecting one soon after you have lost one is simply wishful thinking. Also, even if you get one, there is no guarantee the salary currently drawn will be as attractive as the previous one.
- You or a family member has an illness. A debilitating one at that too. Where do you think you will have the funds to help you or the member get treatment? Also being too sick can make you lose your job. You would then be in a situation explained in point number 1. In addition to which the cost of treatment will add up.
- That property tax which you knew was under control for a long time has suddenly been raised. While previously budgeting for the taxes, you had never ensured some extra buffer for the future and now the future strikes back. It is again the savings which will come handy.
- You have been downsized and your hours rolled back. You are now a part time employee with very little cash in hand.
- An accident is a rude shock. Can happen to anyone of us at any time. Hence we call it an accident. The money needed for treatment needs to be saved from the beginning.
There is a myriad of reasons for people to start saving. The list is long and exhaustive.
If you haven’t started saving, this is the time.