An Emergency stash is one of the most important things you can have to boost your money situation because it provides for situations where you need money quickly. The nature of emergency is that it can arise any time - maybe even today. This article looks at what constitutes an emergency and how to be better prepared if one comes up.
What constitutes a money emergency?
Save your Emergency Stash for a genuine emergency; something you couldn’t have predicted would happen at that time. Overspending your budget is not an emergency.
Genuine money emergencies
- Unexpected medical bills for you or your family (not your annual dental checkup)
- Death or illness of your parents or other family members requiring a trip at short notice or financial support for those affected
- A major breakdown or accident with your car, important appliances (like the stove or hot water or heating system) or your home (not that the regular service cost a bit more than usual)
- Fines or legal expenses (not the cost of the conveyancer on your house purchase or if you habitually get parking tickets)
- Loss of income through unemployment or being injured so you can’t work
- Relationship or marital breakdown
You may have insurance for some of these, but it can take a while to get paid. Income Protection Insurance will replace your income if you can’t work due to accident or illness. Other Insurance that might help with Emergencies includes your Health Fund, Car insurance and Home and Contents. Government support may be available if you are a victim of crime or major natural disaster.
If you draw on your Emergency Stash and later get an insurance payout, make sure you replenish your stash first from the proceeds.
Not money emergencies
- Nothing to wear
- A sale bargain
- Appliance breakdown (like a TV)
- Expenses that are bigger than you planned (like your power bill)
How to be prepared for any money emergency
1. Define your Stash
Get on the same page as your partner about what constitutes an Emergency and therefore your Stash can be used to pay for it.
2. Replenish your Stash
When you withdraw from the Stash, have a plan to replenish it. Apply any insurance proceeds to the Stash. You may need to defer other goals to get your Stash back on track.
3. Review your Stash
Review your Stash and make sure it’s still right for your circumstances. You might even find that you need less in there now than when you first set it up.
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With over 25 years in Financial Services from consulting to management, Vince Scully is the go-to guy for wealth management and financial advice. Before creating Life Sherpa®, Vince founded the Calliva Group; a fund manager, product issuer, adviser and lender. Vince is an adviser to the Wealth Management Industry, and prior to his role as CEO at Calliva, a senior member of Macquarie Bank’s infrastructure team.