Blog posted On December 05, 2024
If you’re looking to buy a home, do you have an emergency fund? And if you’re like many prospective first-time home buyers, this question may have sent a chill of anxiety down your spine. You’re not alone. This is a big financial regret for Gen Zers and Millennials; according to CNBC, “not saving enough for emergencies ranks at the top of their lists.” But don’t worry! We’re here to provide you with helpful information about emergency funds and calm any homeowning anxieties you may have, ensuring that your homeownership journey is a successful one.
A Safety Net for the Unexpected
It’s not just good to be prepared for the worst, it’s essential. What if you’ve just moved into your house using up all of your savings, only for a tree to smash through your roof a week later — how can you afford the repairs? An emergency fund is exactly what you need in these unpredictable, money-leeching scenarios. Your back-up savings account is the bread and butter of happy homeownership, like a friend you can always count on in an emergency.
Other New Home Repair Woes
Aside from a tree crashing on your roof, the unexpected “joys” of homeownership can have a funny habit of making themselves known within the first few months of moving into your dream home. The furnace might be on its last leg, and of course, you might’ve moved in right before winter. Or you may have to deal with a closet collapsing, a leaking garage roof, water damage in your crawlspace, a malfunctioning defrost tube in your fridge, or perhaps your water stops working in general, leading you to fully replace your well pump and pressure tank. If you’re not a handy person, you may have to pay a sizeable amount to professionals to patch together the home you just spent a big down payment to buy. An emergency fund can help assuage your anxieties and take care of these unforeseen circumstances.
Offset Income Loss or Unemployment
Career changes and unexpected unemployment are unfortunately a possibility. Whether it’s a reduction in your work hours or a companywide lay-off, an emergency fund can serve as another type of safety net. You’ll want to save enough money to cover your monthly mortgage payments and other household essentials.
How Much Should I Save?
This general rule of thumb suggests 3-6 months of basic living expenses to set aside. However, once you hit that goal, don’t stop setting aside money. Keep contributing a set amount from each paycheck every month just in case. Our loan professionals can help customize your own emergency fund strategy by evaluating your income and lifestyle so that you have a better understanding how much is enough for your unique situation.
Avoid High-Interest Debt
Because many don’t have an emergency fund before they become homeowners, people often have to turn to high-interest credit cards to cover those unexpected costs. Having your safety cushion means that you don’t have to accumulate high-interest fees and can avoid a nasty cycle of debt, keeping both your credit score and financial health intact.
Set Realistic Goals
The idea of starting an emergency fund may seem daunting, but it doesn’t have to be. You can start small and set realistic savings goals, increasing these goals as you achieve them. You can easily set up automatic transfers from your checking account to your savings account. It’s all about making saving money a habit.
It’s important that you move into your new home with a solid financial foundation and a boosted peace of mind. Reach out to our financial advisors today for more tips on preparing yourself for homeownership and setting yourself up for success.
Source: CNBC, NerdWallet
