Emergencies are a fact of life. When you’re faced with an expected event—from a broken bone to a job layoff—you can be ready. An emergency fund is a stash of money set aside to cover financial surprises life throws your way—events that can be stressful and costly.
Last year, Mitch and Jenn had a string of bad luck. Mitch broke his leg in a skiing accident, Jenn’s car broke down requiring major repairs and their home’s aged roof decided to fail right in the middle of a major storm.
The timing for all of this wasn’t ideal—four weeks before Christmas. The financial and emotional toll of these events continues to be huge, but nothing like it might have been if they hadn’t been diligently building their Contingency Fund, more commonly known as an emergency fund.
An emergency fund creates a safety net for a home and family. This way you are less prone to experience a disaster when an emergency comes your way.
Mitch’s health insurance is covering most of the costs of his surgery and follow-up therapy. Still they’ve had to come up with more than $2,400 to cover his deductible, co-pays, and prescriptions. The car repairs were just shy of $2,700—not surprising given the car’s age and 140,000 miles.
It was the roof that really threw them for a loop. The estimate to repair it—with no assurance that said repairs would last for longer than a few months—was $750, with a new roof coming in at an estimated $12,000.