One of the core tenets of a strong financial foundation is maintaining a healthy level of savings.
Saving money isn’t always exciting, but a rainy-day fund is imperative to your financial health. It only takes one unexpected expense to topple your finances. A recent survey revealed that an unexpected expense of $400 is enough to throw the average American’s monthly budget severely off track.

The lack of an emergency fund can result in taking on additional debt or not being able to pay for a critical expense, like your child’s braces.

There are several reasons you might require a rainy-day fund. Consider the following common, but typically unplanned for, expenses:

1) Medical bills. It’s no secret that medical care is outrageously expensive in the United States. A simple out-patient operation, like a hernia repair, might only take 30 minutes. But it can easily cost $15,000 or more. How long would it take you to pay back $15,000? Even if you have insurance, you might still be on the hook for a deductible of several thousand dollars.

2) Automobile repairs. Once the warranty has expired, your automobile has the potential to become a financial disaster. Once you’re no longer making an automobile payment, continue making the payment to yourself. Save the money for future repairs or your future automobile.

At some point, all cars become more expensive to fix than they’re worth. Ensure that you have the funds in place to minimize the amount of debt necessary to obtain a new car. Ideally, save up enough to pay cash for your next ride.

3) Major home repairs. The water heater broke! Replacing a roof, a/c unit, furnace, repaving the driveway, or replacing appliances can cost more than the average homeowner has sitting around in his bank account. Some repairs can wait, but others cannot.

An emergency fund is necessary for many of these expenses. Your homeowners’ insurance doesn’t cover everything.

4) Funeral expenses. Funerals are expensive. And even if you don’t have to pay for a funeral, you may have to travel half-way across the country to attend one. Deaths are often unexpected, and this isn’t an item that people build into their budgets. If there’s one truth in life, it’s that everyone dies eventually. There’s no escape.

5) Dental expenses. A broken tooth, braces for the kids, too many teeth, not enough teeth, or mishap with a baseball can cost more than your bank account will support.

While your health insurance might be great, most dental plans leave a lot to be desired, especially with regards to cosmetic issues.

The best time to start an emergency fund was 10 years ago. The second best time is right now.

Begin setting aside a percentage of your income and seek to increase the amount over time. Aim for at least six months of living expenses. That will be enough to handle most financial emergencies. Anything you’re able to save beyond that can be invested with a more long-term focus.

Emergency funds have advantages you may not have considered:

1) You’ll be much more relaxed. Knowing that you have money available to meet your unexpected financial needs is reassuring. You’ll worry much less.

2) It prevents poor financial decisions. When you need cash, but don’t have any, it’s easy to make financial mistakes that can be costly. Payday loans and the use of high-interest credit cards are two examples.

Ample savings is a financial necessity. It provides a cushion for life’s unexpected twists and turns. One financial mishap can easily undo years of your hard work. Begin your emergency fund today and secure your financial future. It’s never too late to get started.