Can your bank account handle financial emergencies? Unexpected expenses can force you to rely on credit cards, which can lead to debt if you don’t have enough savings to cover car repairs, medical bills, home repairs, job loss and more. That’s why a great financial decision is to build an emergency savings fund right now, according to personal finance expert Suze Orman.
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Orman believes that having an emergency savings account is absolutely vital. The bestselling author and wealth advisor said, “The one thing that every single person needs is an emergency savings account. I’ve been saying that for over 40 years now, and it’s been getting to be more and more of a problem.”
She stresses that building emergency savings in a separate account is an urgent necessity, especially as economic uncertainty rises. No matter what you have in store for your short-term or long-term savings plans, it’s a good idea to have a stash of cash that is easily accessible for all things unforeseeable.
Your primary financial goal is to start saving now because the money set aside for a rainy day could keep you from drowning in debt. Here are three big reasons why the financial guru says everyone needs an emergency savings account.
Orman has long preached the vital importance of saving for emergencies. However, with today’s rocky economy, having a cash cushion to cover costs is more essential than ever. As Orman explained, “We’re living in a very precarious time right now.”
With savings drained, debt burdens growing and costs inflating rapidly, if you don’t have emergency reserves, you might have reason to worry. Your checking account can only go so far and if you experience a medical emergency, only so much is covered by insurance.
Instead of racking up hefty credit card bills with high interest rates, you can put your emergency fund toward unexpected expenses. An emergency fund serves as indispensable financial protection when the unexpected occurs. Having three to six months’ worth of living expenses set aside can keep you afloat during periods of income loss, accidents, illnesses or other disruptions.
Orman warns that people without adequate emergency savings funds “have got to be scared to death.”
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Financial advisor at The Options Lady, Laurie Itkin, agrees that emergency savings have become urgently important, given steep inflation and waves of layoffs. Those without cash reserves may have no choice but to put regular expenses on high-interest credit cards if paychecks suddenly cease, and carrying high-rate debt destroys finances.