11 Ways Life Is Amazing With an Emergency Fund

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These days, far too many people are living on the financial edge. High rates of personal debt are crippling many families, and leaving them unprepared for the unexpected.

Building an emergency fund is an important part of any financial plan. In fact, it may be the most important thing you do with your money. Opinions vary on how large an emergency fund should be, but most financial experts suggest socking away at least three months worth of salary (or more if you can).

Let's take a look at the many ways an emergency fund will improve your life. (See also: A Step-by-Step Guide to Creating Your Emergency Fund)

1. You Can Get Stuff Fixed

People without emergency funds will often let problems go until they get even worse. That car repair that might have been $500 could turn out to be $2,000 later if it's not addressed. That flooded basement could turn into a massive mold problem if you don't get it taken care of right away. An emergency fund is a necessity for any homeowner.

2. You'll Never Have to Cheat Your Future Self

If you have an emergency, you may find yourself dipping into your retirement savings. If you do this, you may pay penalties, and you're costing yourself thousands of dollars down the road. Keep an emergency fund so you won't have to tap into your retirement.

3. Getting Sick Isn't the End of the World

So you tore your ACL in a bike accident, and even though you have insurance, the medical bills are higher than you expected. It's okay. That's what an emergency fund is for. If you have money saved, you can focus on the most important thing — getting well.

4. You Can Endure a Layoff

As someone who once faced two layoffs in a four-year period, I can tell you that having some money in the bank can really take the pressure off. According to the Bureau of Labor Statistics, more than 45% of unemployed people in February reported being out of work for more than 14 weeks. An emergency fund will allow you to keep paying your bills, and you may also have the luxury of waiting for a new job that's a good fit for you.

5. You'll Avoid the Debt Spiral

If you don't have the cash to respond to an emergency, you may find yourself tapping credit cards or taking out a second mortgage. Before you know it, you're saddled with ever-increasing credit card payments. Your financial situation just gets worse from there. An emergency fund will prevent you from facing an explosion of debt.

6. You Won't Have to Borrow From Friends and Family

There's nothing wrong with family members lending each other a hand, but things can get stressful when money is involved. Will you have the ability to pay your brother-in-law back if he loans you $2,000? How will he react if you can't pay up? And if you do get a loan, will there be strings attached? Family members might be more forgiving than a bank, but you run the risk of straining relationships along the way.

7. It's Easier to Be Your Own Boss

Having an emergency fund is especially important if you have unpredictable income. If you're a business owner or freelancer, you'll go through ups and downs and may even have stretches where you are bringing in no money at all. Build up your emergency fund when things are going well, and you'll find that the lean times won't seem so bad.

8. You Can Splurge Once in a While

Building up an emergency fund takes financial discipline. But ironically, this financial discipline could eventually mean that you can be irresponsible once in a while. When you have no savings, going out for a big steak dinner is a bad idea. But when you have an emergency fund, you can get away with it on occasion. The key is to avoid splurging before that savings is built up, and make sure you have a plan to replenish any funds you might dip into.

9. It Makes It Easier to Have Kids

Kids are expensive, so on the one hand, they do make it harder to build up your savings. But if you work hard early to make sure you have an emergency fund in place, you'll be prepared to take on the expenses that parenthood brings. Kids break things. They hurt themselves, and each other. They have educational needs and activities that often cost more than expected. Moreover, having a good chunk of savings makes it easier for parents to take time off work to care for new babies. An emergency fund is a parent's best friend. (It's also worth noting that emergency funds can be hugely important if you find yourself with a new addition unexpectedly.)

10. You Can Survive Your Mistakes

Maybe you were late on your taxes and have to pay a penalty. Perhaps you (or your kid) spilled grape juice all over your laptop, rendering it unusable. Maybe you got distracted while driving and smashed up the car. No one is perfect. But when you live without an emergency fund, you're living without any margin for error.

11. You Will Have the Gift of Flexibility

An emergency fund can keep you from getting locked in. You can take time off work to work on that novel. You can take that dream job, even if it doesn't pay quite as much. You can dump your boyfriend and move into another apartment. If you live below your means and build up your savings, you end up with more options in your life. And that's a major key to happiness.

How has having an emergency fund benefited you?

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