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4 Emergency Expenses to Plan for in 2021

by Maurie Backman | Feb. 6, 2021

The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

Wooden cutout of house surrounded by home improvement tools.

Image source: Getty Images

Here's why it pays to boost your cash reserves.

You've probably been told time and time again that it's important to have money tucked away in a savings account. But if you've never been hit with an unplanned bill, you may not feel so compelled to sock away that extra cash.

Here's the thing, though: Life has a funny way of costing us more than expected. With that in mind, here are a few emergency expenses you may encounter in the course of the year.

1. Home repairs

When you own a home, there's always the potential for something to go wrong, whether it's a minor issue like a leaky sink or a major issue like a leaky roof. Home repairs can be extremely expensive, and you can't always tackle them yourself. As such, it's essential to have money on hand to hire a professional to take care of a problem as soon as it pops up. Also, don't assume you won't get hit with costly repairs just because your home is on the newer side. Problems can come up with recently constructed homes, too, and while many of these homes have a warranty that covers your first year, after that, you'll be on your own.

2. Car repairs

If you own a car, you probably rely on it to get to work, run errands, and, well, function. So if an issue arises with your vehicle, it's imperative that you get it addressed at once. And unless you happen to be a mechanic or have comparable skills, you'll need to pay for car repairs. Remember, it doesn't always matter that you do a great job of keeping up with auto maintenance. You never know when you might run over a nail on the road and need a new tire -- and that's a relatively low-key expense. So be sure to sock away funds to cover those costs.

3. Medical bills

You can be a perfectly healthy individual only to have an accident or get injured and land in the emergency room with a pile of bills. Even people with decent health insurance can wind up on the hook for costly medical expenses, so you need to have emergency cash on hand in case that happens. After all, when you're trying to recover from a health-related episode, the last thing you need is the stress of how you're going to pay.

4. Job loss

You never know when you might lose your job, and unfortunately in today's economy, it's an even more distinct possibility. While those who lose their jobs through no fault of their own are generally entitled to unemployment benefits, those benefits may not come close to replacing your paycheck in full. That's why you need money in the bank to help ensure you're able to keep up with your bills while you look for work.

It's more fun to spend money than it is to save it, but the reality is that you never know when having an emergency fund will come in handy. At the very least, you should aim to sock away enough money in the bank to cover three months of living expenses. And for better protection, push yourself to save six months' worth. Having that cash on hand could turn an otherwise dire situation into a manageable one, so do your part to buy yourself that protection.

These savings accounts are FDIC insured and can earn you 12x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 12x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2021.

Two top online savings account picks

Rates as of Feb. 15, 2021 Ratings Methodology
Logo for CIT Bank Savings Builder
Logo for American Express® High Yield Savings Account
CIT Bank Savings Builder American Express® High Yield Savings Account
Member, FDIC Member, FDIC
Rating image, 5.0 out of 5 stars.
5.0 stars
ToolTip Icon for Star Rating. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. = Best
= Excellent
= Good
= Fair
= Poor
Rating image, 5.0 out of 5 stars.
5.0 stars
ToolTip Icon for Star Rating. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. = Best
= Excellent
= Good
= Fair
= Poor
Open Account

On CIT's Secure Website.

Open Account

On American Express' Secure Website.

Read Review Read Review

APY: Up to 0.40%

APY: 0.50%

Best For: No monthly maintenance fee

Best For: High APY

Min. to earn APY: $25k or $100 monthly deposit for highest tier

Min. to earn APY: $0

About the Author

Maurie Backman
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Maurie Backman is a personal finance writer who covers everything from savings to retirement to healthcare. Her articles have appeared broadly on major outlets such as CNBC, MSN, and Yahoo.

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The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

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