What should you emergency fund cover?

Forgetting about major expenses can be easy to do as you carry on with day-to-day life, until the inevitable happens and you’re faced with the only option: Using your credit card. This could possibly lead to high interest rates that feel impossible to pay back.

The best thing you can do for yourself is prepare an emergency fund for the unexpected. Here are 5 emergencies you should keep in mind:

  1. Car repairs

Car troubles are nearly inevitable. Just because you have a reliable vehicle doesn’t mean nothing will go wrong. In fact, every vehicle eventually requires maintenance repairs such as new tires, brakes and more. Having an emergency fund to cover repairs can prevent further damage from neglected problems. CBS News reported a survey AAA found one-third of Americans can only afford a car repair by going into debt.

To prevent this from happening, AAA advises putting $50 per month aside for car repairs and budget for monthly car care expenses.

  1. Medical expenses

Taking care of your health is important. Whether it’s a trip to the emergency room or continued care for medical problems the bill can add up quickly, especially without health insurance. Avoid piling on debt and calls from collectors by budgeting your medical expenses each month, even if you are in good health.

Some workers can prepare for medical expense by taking a portion of their paycheck and placing it in a savings account used specifically for healthcare costs, typically called an HSA (Health savings account) or FSA (Flex spending account). Having an additional savings can be beneficial, too.

  1. Job loss

The biggest hardship anyone faces is losing a job. You no longer have an income and it’s unpredictable when you could have one again. Having an emergency fund can prevent the burden of debt or asking family members for some cash to get you through a tough time.

Money under 30 has an emergency fund calculator where you can estimate how much you would need saved up in the event you lose your job.

  1. Home repairs

Unless you’re a renter, home repairs can be a major expense. If you need a new furnace in the dead of winter or your air conditioner stops working in the midst of the summer heat, an emergency fund will help pay for these expenses. You could likely prevent a large credit card bill later.

The Balance explains the one percent rule of thumb: This means you should set aside 1 percent of the price of your home per year. For example, if your home costs $45,000, you should set aside $4,500 for maintenance cost.

  1. Pet care

It may not seem like much to cover the basic cost of having a pet. But, much like you, your pet could have medical expenses, too. Setting aside an emergency fund for your pet isn’t as crazy as it seems.

Saving for your pet’s routine care, such as vaccinations and check-ups could potentially save you from larger expenses later.  Also, you can consider insurance coverage for your pet by checking with your home and auto carrier to see if they carry a pet policy.