It's important to have a stash of cash set aside in an emergency fund. At a minimum, an emergency fund should consist of three months of living expenses. If you have dependents, your emergency fund should consist of six months of living expenses. Here are seven surprises that should motivate you to start or add to an emergency fund:
Whether you're laid off or decide to leave a job for personal reasons, an emergency fund provides a temporary income safety net to help pay for necessities.
Even if you have health insurance, it doesn't always cover the whole cost of care, especially if you or a family member is in need of an ambulance ride, a major surgery or physical therapy. And don't forget about your pets. Veterinary visits, especially during an emergency, can be costly if you don't have pet insurance.
Cost of Living Increases
A fluctuating economy can mean fluctuating bills and housing payments. Whether your rent skyrockets when you renew your lease or your heating bill climbs higher with the cost of energy, an emergency fund will allow you to cover these costs until you find a better financial alternative.
Transfer or a New Job
If your company is transferring you to a new office or you just accepted your dream job across the country, your employer will often help pay for your moving expenses –- but not all the time nor always for the full amount. Movers, temporary housing and the cost of furnishing a new place can add up quickly.
If driving is your main mode of transportation, a problem with your car impacts your ability to go to work, shop for groceries and fulfill other activities in your daily routine. Best case, an issue with your car requires replacement of minor parts. At worst, you have to replace it entirely. Either way, car maintenance is expensive and often required suddenly.
Major Household Repairs
You may have insurance to cover some of the more common household issues, but if you have a high deductible, it might be a challenge to come up with the cash to repair a flooded basement or repaint the exterior.
It may seem ominous to plan ahead for mourning, but if you lose a loved one, the last thing you want to worry about is travel costs. You also wouldn't want the cost of a plane ticket to prevent you from being there when someone you love gives birth, gets married or marks an important event.
If starting an emergency fund feels overwhelming, start small. Setting aside even a few dollars a week will help build up a reserve over time.
Holly Perez is a consumer money expert at Intuit and spokeswoman at mint.com, a Web and mobile money management tool.