That nature of life is to be unpredictable. It’s one of the inescapable truths of the human condition that no matter how well or comprehensively we plan for the future we’re inevitably going to be blindsided by events that we never saw coming. Car accidents, hurricanes, medical emergencies, job layoffs, and sudden and unexpected bills: all are calamities that can appear out of thin air at the snap of a finger.

Is that all there is to it though? Are we really just at the whim of a fickle universe?

Of course not. Though we may not know what challenges await us in the future, we do know that they’re coming, and we can take proactive steps to minimize the damage they cause when they do hit. And one of the most effective ways of protecting ourselves from future calamities is with an emergency fund.

What’s an Emergency Fund?

An emergency fund is pretty much what it sounds like. Usually, it’s a dedicated savings account which you contribute to regularly that stays put until you’re hit by an emergency, at which point you start pulling money out to cover whatever the emergency is. Having an emergency fund stops you from having to scramble at the last minute for cash or resort to loans to get the money you need.

Why Can’t I Just Use a Credit Card for Emergencies?

Because credit cards are expensive. Even the most affordable credit card has an interest rate that will fester and grow until it’s paid off, and the worst will cripple you with ballooning debt. Not only will this cost you more in the long run, having outstanding debt on your credit card hurts your credit score which then determines everything from your car payments to the mortgage.

How Big Should My Emergency Fund Be?

This will vary from person to person and financial situation to financial situation, but generally, a few thousand dollars is a good amount. Most Americans can’t handle a $400 emergency without being forced to go into debt, so a few thousand will put your head and shoulders above everyone else.

If you feel like getting a more exact number, then the most effective way is to sit down and list which emergencies could hit you, and how much they would cost. For example, if your car is getting old, list out the repairs it’s likely to need, and how much they’re likely to cost. The categories of emergencies you should consider are: natural disasters, medical emergencies, car repairs, and home repairs.

 

What If It Gets Depleted?

Though rare, it’s possible that even if you’re successfully able to create and maintain an emergency fund that over successive emergencies it may get drained without having a chance to be refilled. If it does happen, what do you do?

Another option to fill the gap is a flex loan. Flex loans are short term and fast cash loans that are designed to deal with unexpected financial challenges just like an emergency fund. There’s a variety of flex loan locations in Tennessee that mean you’re closer to one than you think.

 

Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.