Are Emergency Savings Accounts Really that Important?

Financial planners often champion the need for an emergency savings account. Emergency savings accounts are designed to keep you from having to rely on credit when unexpected expenses arise like unemployment, home repairs, auto repairs, hospital bills and etc. But are emergency savings accounts really needed? Definitely!

I am glad that I had an emergency savings accounts because I had two emergencies occur over the last two weeks. My hot water heater in my house broke two weeks ago and needed to be replaced. I called around for an estimate and a 40 gallon heater with installation cost from $800-$1300. I ended up paying $850 which I thought was pretty fair. A week later I had my sump pump break. This was something that I needed to fix immediately because the sump pump keeps excess water from seeping into the basement. Fortunately, I discovered the problem before any water could flood my basement. A new sump pump cost me $475 with installation.

An emergency savings account has continually proved to be a winner for me over the past few years. When something breaks down it is comforting to know that I don’t have to go into debt to pay for the repair. I am saving anywhere from 8-14% by not placing these charges on my credit card. An emergency savings account also keeps me from having to sell an asset(stock, mutual fund, bond) just to cover the emergency expense. Emergency savings are a lifesaver when a crisis occurs. After I have taken money out of my emergency savings and used it then it’s time to build my savings back up again.