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Do I really need an emergency fund?

In these times of economic difficulties it can often be easy to live hand to mouth, and indeed many people have no choice but to do this, with many questioning the need for an "emergency fund". Where possible it would be sensible to maintain some kind of emergency funds in the event of unforeseen circumstances which if you're living hand to mouth could literally bankrupt you. However, how do you build an emergency fund?

A number of people find the easiest way to build an emergency fund is to put away a small amount of money each week or each month, where possible, and allow this to build for the future. By effectively forgetting about this emergency fund it is surprising how quickly it will build up and ultimately how useful it could be in the future. The most difficult aspect of having an emergency fund is the temptation to dip into this when maybe it is not required. If you can withstand the temptation of dipping into your reserve funds it is highly likely that it will be a godsend in years to come.

How many times have you had emergency repairs required for the car, the washing machine has broken down, the children need new clothes or some other emergency? Can you imagine how much pressure would be taken off you by having an emergency fund which you have built up over a prolonged period of time?

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