3 Reasons You Could Seriously Regret Not Having an Emergency Fund

by Christy Bieber | Updated July 25, 2021 - First published on Jan. 26, 2021

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A hand holding a hammer over a worried-looking piggy bank.

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Have you considered these consequences of not having an emergency fund?

Do you have an emergency fund that covers three to six months' worth of living expenses? If you don't, you could end up wishing you were better prepared when an inevitable emergency comes up.

Sadly, emergencies are a fact of life that can happen to anyone at any time. If you've put three to six months of living expenses in a high-yield savings account that you can access when needed, you'll be financially ready for whatever life throws your way.

If you haven't saved for unexpected surprises, though, there are three big reasons you could come to regret that.

1. You'll have to deal with added stress in a bad situation

Emergencies are undeniably stressful. After all, an emergency is an unexpected negative life event that you need to deal with right away.

When you're coping with issues such as a car breakdown, job loss, or medical crisis, you want to focus on addressing the problem at hand -- like finding a new job or getting the best quality care. The last thing you need under those circumstances is to worry about how to pay for the expenses of the emergency.

If you don't have an emergency fund, though, you could be left scrambling to cover your costs. This could mean spending time applying for loans or credit cards -- or trying to work out a forbearance agreement or payment plan with your mortgage lender.

2. You may not be able to borrow to cover your emergency

While you may assume you can borrow money if an emergency catches you unprepared, that's not always the case. If you lose your job, for example, lenders probably aren't going to be eager to approve you for a loan or credit card to cover your bills when you have no income coming in. This could be an especially big problem if you're trying to borrow a lot of money to cover large emergency expenses.

3. You could end up borrowing at a high interest rate

When you absolutely need money you don't have, you may struggle to get approved for a loan in an emergency situation. And unfortunately, you could find yourself in a desperate situation where you're forced to secure a very high-interest loan such as a payday loan.

The huge interest costs you'll have to pay could turn a short-term emergency into a long-term financial disaster if you get trapped in debt that takes months or even years to pay back.

How to build your emergency fund so you aren't left with regrets

Obviously, you don't want to be left with a bunch of financial regrets when you're in an emergency situation. But at the same time, it can be daunting to even consider building an emergency fund.

The good news is, you can start small. Even an emergency fund of $1,000 or $2,000 could protect you financially from most emergencies. If you get a tax refund, you can stick that straight into your emergency fund. Or you could temporarily slash non-essential expenses from your budget and redirect that money to your emergency fund until you've got enough to see you through a bad situation.

Once you have this starter emergency fund, you can add to it over time until you've got three to six months of expenses saved up. This will help ensure you're ready for anything that goes wrong so you don't find yourself with regrets.

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