My recent car accident is a great example of why you need an emergency savings account. I was riding my bike to work one Friday. I took my regular route. Traffic was normal. Nothing was out of the ordinary . . . then bam! I got hit by a car, flipped over the car with my bike, and landed on the concrete on top of the bike.
When I woke up, the driver was holding my hand and trembling. A small circle of people surrounded me. He said, “Someone call an ambulance!” Instantly, my first thoughts were, “Sh**, an ambulance is $400 – $500 for a 10-minute ride! Maybe I can stand up and ride in someone’s car.” (Yes, those were really my first thoughts.) I tried to stand but couldn’t move. I reluctantly sighed to myself, “An ambulance it is . . .”
So far the medical costs have been $1,230! Do you have $1,200 lying around your checking account? I don’t.
The costs above included my health insurance covering 85% of costs after I met the $200 deductible. (To answer the most asked financial question: No, I can’t sue the driver.)
Those were only the medical costs! For the next 3 weeks, I was using pain killers, crutches, a neck brace, and a wrist brace. I looked as bad as I felt and used a few luxuries to ease my suffering. I took cabs more often and bought lunch and dinners, rather than carry food to work or standup to cook. I also bought some clothes as a distraction.
So far the accident has cost me $1,512! Without an emergency savings account, I would have gone into credit card debt. Medical costs are the #1 reason for bankruptcy in the US.
Emergencies—car accidents, losing your job due to the recession, needing a new set of tires, a flood in your apartment—are surprises. That’s why you NEED an emergency savings account. You can start one this week by saving $5, $25, $50, or any amount your can consistently save each month.
What would you do if you had a $1,500 accident? If you don’t have an emergency savings account, how will you start one?