5 Benefits Of An Emergency Fund

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When it comes to saving, one of the most important accounts to contribute to regularly is an emergency fund. This account exists for the sole purpose of providing aid during times of financial stress or dilemma and takes time to swell up to a level that can do a significant amount of good. Though an emergency fund largely has a singular purpose, the benefits of creating one and contributing to it regularly go beyond the scope of this account’s perceived capability.  Whether you have been building up your emergency fund steadily or are just getting started with your saving, there are some important benefits to consider about your stockpiled savings.


One lesson that is reinforced time and time again is the understanding that things do not always go as expected. While the degree that unexpected events affect us varies, when it relates to finances, the repercussions can be severe. Whether it’s a car accident, medical emergency, or unexpected death, at any moment you may find yourself in a situation where you are forced to dish out a large sum of money. An emergency fund mitigates the severity of that expense by covering the majority or entirety of it, enabling individuals to maintain their financial health and address the situation at hand. It is for that reason that emergency funds should be given regular  deposits to ensure that they can lessen the financial burden by as much as possible.


Along with acting as a buffer for unforeseen events, emergency funds also provide a certain amount of flexibility to individuals. This typically comes in the form of risk taking. While it is best to refrain from “banking on” your emergency fund as a bailout, having it in the event one particular venture or action did not realize the returns you were anticipating is helpful. Sometimes emergency funds are also used as a quasi escape plan, most notably being tapped in the event individuals need an out from a bad job or are planning to move suddenly, but do not have the funds needed within their other accounts. Should that happen, it is important to restore your savings as soon as you are able to.


For many people, getting into the habit of saving is something that does not come easily. It often requires time and repetition, as contributing to your account gradually and watching it accumulate more is necessary to slowly help people establish a routine. In the case of an emergency fund, the kind of regular contribution required to build up the account provides the perfect opportunity for individuals to start getting into the habit of putting away. And as it becomes easier, this skill can be applied to other accounts or contexts that may require routine saving. Not only will more practice enable the skill to be hardwired, the amount of money people contribute to their fund will ultimately go back to them and make their emergency savings that much more valuable.

Out of Reach

An important part of any emergency fund is that the money stored within it only be used when necessary. To aid in the effort, it is best for emergency savings account accessibility to be limited and for the fund to be established within a separate account. While that means preventing yourself from being able to access it from your debit card or a quick ATM withdrawal, that is also beneficial. By reducing your ability to pull from the account, you will decrease the likelihood that you tap it unnecessarily. This will give the fund time to grow into an asset that you will able to use later on down the road. Keeping your emergency fund in a separate account will also enable you to maintain a better mental record of how much money is collected, as your reduced ability to access it will prevent the balance from being subject to unexpected change.

Peace of Mind

Above all else, there is something to be said about what maintaining an emergency fund does for stress levels and putting us at ease. Everyday, we come across stories that serve as reminders about what could happen unexpectedly and why a savings fund is so important. As the thing that is meant to save us from financial ruin, just knowing that there is an emergency fund in place should something happen will help you to sleep easy at night. And as you go about your life, whether as an individual, sibling, or a parent, knowing that there is a resource to ease the burden for your family should something happen to you means you can continue to help your loved ones and prevent them from being put into a difficult situation financially.