Be Prepared for These 7 Financial Disasters
Emergency Fund Examples – Be Prepared for These 7 Financial Disasters
May 1, 2019 By Andrew
Unless you’ve been living under a rock, I’m sure you’ve heard the conventional wisdom that you need an emergency fund.
And of course it makes sense to save for a rainy day. Yet life gets in the way, the normal bills continue to pile up, and emergency savings gets pushed to the back burner. In fact, according to a recent survey, only 39% of Americans could cover a $1,000 emergency expense without dipping into credit cards or some other form of debt.
It makes sense – we tend to prioritize expenses right in front of us instead of the unknown ones of the future. But when the future unknown collides with present reality, it can create a lot of undue stress if you aren’t prepared.
Emergency Fund Examples
So what are some examples of situations where an emergency fund is a necessity?
Lucky for you, I am one of those people that worries unnecessarily about future uncertainty and hyperventilates when there is less than $10k in the bank account. As such, I have pre-worried about all the possible emergency fund examples so you don’t have to. You’re welcome!
1. Car Expenses
This is the probably the most common “emergency” that is always right around the corner. Whether you get in a wreck and have to pay for expensive repairs (or a $500 or $1,000 insurance deductible), or get a flat tire, almost everyone has to deal with unexpected car expenses a some point.
Having a healthy emergency fund can help you weather the storm and not have to run up your credit card and deal with the stress of paying off the debt for months.
2. Surprise Medical Emergencies
When my daughter was 2, she was running around the house with a wooden spoon in her mouth (don’t ask me why). She ran face-first into the wall and jabbed the spoon into the back of her throat in the soft palate. While it sounds like a ridiculous situation now, in the moment it was extremely scary as she was choking on blood and crying in pain.
We rushed to the emergency room, and it took 3 different doctors before they were satisfied she did not need emergency surgery. Fortunately, they sent her home with some painkillers and a follow-up with a pediatric ENT, and she made a full recovery.
When a medical emergency happens, the last thing you think about is how you’re going to pay for it. Even if you have amazing insurance, most policies these days make you cover several thousands of dollars in expenses out of pocket before you hit the deductible.
We ended up getting a bill for around $1,500 just for the emergency room visit, which was under our deductible so it all had to come out of pocket. Fortunately we save in both an emergency fund and an HSA (Health Savings Account) specifically designed to cover medical expenses like this.
3. Major Home Repairs
Owning a home is great, but when it comes time to replace the roof or the HVAC, I often wish I was still a renter. Even if the major systems are in good shape, it seems like every few months some unexpected expense comes up that costs us a few hundred (or few thousand) dollars to fix.
Technically, saving for large capital expenses like a new roof or water heater should be a part of your regular budget, not your emergency fund. If your water heater is 23 years old and develops and leak, was that really unexpected? We have a separate fund set up to save money for the large, irregular (but expected) home maintenance items. That’s just part of homeownership.
But then there are the unexpected emergencies that come up. The most recent one for us came during a big storm a few weeks ago. A tree right next to the house split in the high winds and was precariously hanging over the roof. We had to get a tree service out right away to remove the tree before it completely collapsed and took out the roof.
Let me tell you, removing a tree is not cheap. Especially one so close to the house. They have to take extra precautions to take it down in small pieces so as not to damage the roof.
That one tree ended up costing us over $1,000! And since we don’t budget for our regularly scheduled “tree collapsing in storm”, that came straight out of the emergency fund.
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