Emergencies are a part of life. You never know when you’re going to have a major unexpected expense.
Perhaps your car breaks down, or someone you love gets injured or sick.
Maybe you lose your job and cannot cover your expenses or bills for the month. Whatever the situation may be, it is wise to have an emergency fund available so that you can cover the emergency expenses involved.
Another important benefit of an emergency fund is that you don’t need to rely on credit cards or loans. So many people without emergency funds end up having to borrow money by taking out a payday loan or a home equity loan. If you don’t pay back these loans quickly, they’re going to accrue a lot of interest charges and put you deeper into debt. Then you’ll need to seek out an IVA’s company to consolidate your debt so that you don’t have such a financial burden to worry about.
An IVA is an Individual Voluntary Arrangement which enables you to make one monthly payment toward all your consolidated debt. If you end up in a situation where you need such a service, make sure you find the best IVA company out there. Otherwise, you’ll be stuck with an IVA company which charges an obscene amount of interest on your consolidated debt repayment plan.
Alternatively, you could apply for Scottish Trust Deeds if you’re struggling to make your payments. These trust deeds are agreements with your creditors where they allow you to pay only what you can afford each month. This could prevent bankruptcy and the loss of your current assets.
Furthermore, emergency funds will ensure that you never need to visit a stop bailiffs’ site ever again. There is nothing worse than having a debt collector knock on your door demanding you to hand them money for past debts that you owe. They don’t realize that if you had the money, then you would have already paid it back to them. With an emergency fund, you can have peace of mind knowing that debt collectors will no longer hassle you.
First, you need to learn how to build an emergency fund. There are various practices you can implement to ensure that you always have money available when you need it the most. Let’s go over some of these practices now.
1) Loan Protection Insurance
Losing a job can cause you and your family a lot of financial burdens. All it takes is one or two missing paychecks for you to be late on your mortgage payments, car loan payments, utility bill payments, credit card payments, and so on. This will ultimately destroy your credit profile and put you out onto the streets.
However, if you have loan protection insurance, you will receive short-term loan repayment protection if you lose your job or become ill or injured and cannot work. A company like Upsave can offer you this kind of protection if you qualify. It all depends on your existing employment status, the amount you want to cover, your annual gross salary, and other health-related factors. Loan protection insurance can easily serve as an emergency fund whenever your employment is threatened.
2) Funeral Plan
A funeral plan is basically an emergency fund which covers all the costs associated with your future funeral expenses. This type of emergency fund will benefit your family members because you won’t leave them with the financial burden of having to pay thousands of pounds for your funeral.
The typical funeral plan costs £3,500, and it will cover the funeral director expenses, coffin, body preparation & care, ministry services, and crematorium fees. Without a funeral plan, your family could end up paying a lot more than £3,500 for these expenses. Funeral plans are discount packages which will save money in the long run.
3) High-Yield Savings Account
After you’ve prepared for emergencies associated with lost employment or funeral expenses, now you just need to worry about saving money. A little extra money saved each month could go toward a small future emergency, such as car repairs, doctor visits, and home repairs.
But don’t just save this money under your mattress or in some free savings account. Put the money in a high-yield savings account so that you can earn interest on it. Just find a bank that is insured and offers the highest APR on their savings accounts.