- Help you avoid debt
- Provide backup should you lose your job or get sick
- Alleviate stress — you know you have a safety net
- Help you avoid withdrawing from your retirement fund and incurring penalties
How much should you keep in an emergency fund?
Is a college fund more important than an emergency fund?
A college fund is NOT more important than an emergency fund — you have years until your child goes to college (and that’s not always a given), but an emergency can happen at any moment. Cover yourself in case of an emergency, then save for college.
Is a retirement fund more important than an emergency fund?
According to personal finance reporter Tanza Loudenback, creating an emergency fund is more important than aggressively saving for retirement. While you shouldn’t neglect your retirement funds completely, it’s more important to achieve a viable emergency fund over the course of a couple of years than to put that money toward retirement. If you don’t need it in the end, it can go toward retirement. If you do need it, you’ll be able to use it without taking a loan or withdrawing funds early from a retirement plan, which comes with penalties.
Is life insurance more important than an emergency fund?
Life insurance is more important than an emergency fund because if something happens to you as a young parent, your family will be left with virtually nothing if you don’t have a life insurance policy. Three to six month’s salary will only last for those amounts of time, but a life insurance payout can last much longer. While you hope you’ll never have to cash in on it, life insurance is essential for young parents.