The importance of an emergency fund should never be underestimated. Whether you live alone or have a family to feed, saving for your emergency fund should be among top priorities. Comfort food, luxurious toys, fashionable clothes or several cars sitting in your garage will not help you get through the tough times and believe me when I say that you are not immune to disasters and changes in economy.
Unexpected expenses
Events we never planned for happen all throughout our lives. Some of those events are pleasant and free such as meeting an old friend in the market. Others are both unpleasant and costly such as car accidents or breaking your arm. While your insurance may cover bulk of the initial costs, you are likely to be incapable to work and get paid for a while or even lose your job altogether.
Loss of a job and in-between the jobs
Actually, loss of a job is one of the most important reasons why you should have an emergency fund. Economical situation is always changing and anybody can lose their livelihood overnight. You will need some money for the daily expenses while you are in-between the jobs. This is why your emergency fund should be worth as much as possible. You might need to survive several months before the next salary comes in. It is no problem with sufficient emergency fund. You might have to lower your expenses, but there will be no long-term consequences.
On the other hand, you would get into debt and maybe even lose the roof over your head without an emergency fund. Your wife might leave you and take the kids with her and other relatives might sever their ties with you as well once you find yourself to be without a penny. Emergency fund helps you avoid all these potential problems.
Planned expenses
This may sound strange at first, but emergency fund can play a vital role even in your planned expenses. I do not imply that you should plan to spend your emergency money in advance. However, prices often rise unexpectedly. That family holiday which would have originally cost $2000 could turn out to be several hundreds of dollars more expensive. Emergency fund comes in very handy in such times. It helps you stay out of unnecessary debt and allows you to stick to the original plan.
To conclude, it is clever to set aside some money for emergencies. Your emergency fund is one of the most important things for your financial future. Without it, any unexpected and potentially costly event could ruin your finances and your entire life with it.