by Ann E. Smith

Created on: February 09, 2009

It is wise to put away some of your money each month into an emergency savings fund. That way, when something unexpected happens, you will be one step ahead, instead of being thrown into chaos.

Below are some ways that an emergency fund can help take the sting out of financial surprises.

* You are prepared to handle them.

No matter who you are, your life will have some speed bumps, or unwelcome surprises. Some of them will be in the financial camp.

Perhaps you will have a wreck and have to meet a deductible to cover major damages. Maybe your car unexpectedly has a major issue, such as engine troubles, and you will need to buy a new one earlier than expected. Or, let's say an tornado passes through, leaving you without power, and you now will need to foot the bill for several nights at a motel.

All kinds of unexpected financial emergencies can, and will, arise. The key is to be prepared to deal with them. By consistently allocating a certain amount of money each month into an emergency fund, you are preparing yourself to be able to deal financially with the unexpected.

* You will be able to better cope with other ramifications.

When bad things happen, stress naturally increases. If you have an emergency fund in place to deal with financial hardships, then you will lessen the stress and other consequences the situation may have.

Oftentimes, whatever is causing the financial hardship may negatively impact your emotional well being or relationships.

For example, let's say that you get laid off from your job. There are many things to deal with when such a thing happens: fear, anger, uncertainty and depression.

You will be better able to cope with these emotions and stresses if you at least have a safety net to cover most of your bills while you search for a job. In this case, the emergency fund will help you better cope with the other unpleasant effects of losing your job.

* You can make better decisions, as you will not be as desperate.

Desperation is a really bad thing, and it can lead people to make very bad decisions. If you have an emergency fund in place when something unexpected happens, then you are protecting yourself from being thrown into a desperate situation.

As a result, you can better deal with whatever hard decisions you may need to make. This can be critical during a rough time, as you want to stop the ball from rolling downhill, versus giving it a push through bad decision making.

In conclusion, an emergency fund is a really important thing to have. It requires a bit of discipline and sacrifice on the front end, but the peace of mind you will attain is well worth it.

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