Life is full of the unexpected and sometimes our finances can take a hit. A rainy-day fund exists for those moments. Emergency funds allow you to access your funds quickly without having to rely on credit for your day-to-day costs. Plus, knowing that you have provided for future needs gives you peace of mind, and confidence that you have the financial resilience to ‘weather the financial storm.’
Car breakdown / broken appliances
Do you cringe every time you drive your car long distance, as you watch the temperature gauge steadily rising? Or are you just aware that your relatively new car is suddenly over ten years old, and is starting to show signs of old age?
If your car suddenly broke down, how would you pay for it to be towed, and then pay for the repairs it needs to be roadworthy again? You may need to fund costs straight away, and not have time to apply for finance if required. Having a rainy-day fund means you have instant access to the cash you need to get your wheels going again.
The same goes for those expensive household appliances, like washing machines and fridges. Having an appliance break down can have a significant impact on your household (no clean clothes, or cold food), so it’s important to ensure you have the capacity to replace or repair those things as soon as possible.
Interrupted income
Without a rainy-day fund, how would you and your family survive if your income stopped for one or two months? While hopefully you would have Insurance to cover you, most income replacement policies have a wait period before you start getting paid your monthly cover amount. How would you meet your costs during that period? And what if the reason you are off work is not covered by your insurance or ACC (looking after a family member for example)?
What’s more, your rainy-day fund could help you save on Insurance premiums by choosing a longer wait period, and can also give you the freedom to take unpaid time off work if needed, with the confidence that you can still meet your living costs.
Medical costs
While we have a free health care system in New Zealand, not all treatments are funded – and the many treatments that are funded may see you on a waiting list for some time. As an example, while you can get an MRI for free on a waiting list, it would cost you about $1200 if you wanted to get it done sooner, if you don’t have medical insurance.
Being able to receive the right treatment at the right time can make all the difference in recovery. Having a rainy-day fund to call on means you can focus on getting better without the added stress of financial worries.
Other unexpected expenses
If you own your own home, you may be faced with an expensive roof repair or replacing a faulty hot water cylinder. Renters may be given notice and have to find somewhere new to live; moving costs and bond can place a strain on the finances.
Having pets can also see you faced with expensive veterinary bills if your pet is sick or injured. An emergency fund can help you navigate through all these financial challenges.
However, despite your best planning, sometimes those unexpected demands on your fund may exceed what you have available. Or you simply may not be comfortable whittling your hard-earned savings down to practically nothing – even though you have a genuine need for them right now. After all, you never know what’s around the corner.
For a larger expense, a personal loan may be just what you need to meet those unexpected costs, and keep some of your savings as a safety net. Contact us on 0800 666 021 – our team is here to help.
