You may not think you need to save money for the unexpected, especially if you’re happy and healthy and financially stable. However, as the ever-changing economy has demonstrated, sometimes the most seemingly solid financial situations are unstable: Job loss, environmental disasters, and even health issues, for example, can rock your world overnight.
So while you can’t control everything, here’s why having an emergency savings account is especially critical today:
1: Your job situation isn’t set in stone. Even if you’re making $500K a year as a partner for a top law firm, or $1 million per episode as an actor, you could get fired for making a seemingly tiny mistake. Or worse, your company could go bankrupt. Don’t put yourself in a situation where you don’t have at least a few months of living expenses ready to go.
2: Putting money under your mattress earns no interest. Lately it’s become fashionable to try stashing “spare” change and money into envelopes, so you aren’t tempted to spend it. And while this method isn’t a bad one for short-term needs (like saving your spare change in an attempt to making savings fun so you are motivated to continue saving), putting your money into a basic savings account or money market account will help it earn money as inflation rates grow.
3: You could become unable to work at any time. Similar to the first point, you could lose your ability to work at any time. And even with a great disability insurance policy, all of your lifestyle needs may not be covered as you adjust to your disability (whether it is temporary or permanent). Saving six months or more of living expenses will give you more flexibility and ease a lot of stress should the time come when you experience a dip in productivity due to a disability.
While there is no surefire way to fully prepare for every possible scenario or emergency, the more money you put away while you’re able to, the better off you’ll be in the future —no matter how good or bad it is.