You must’ve often heard from your elders that you should always save for a rainy day. Many of you follow that advice and keep an emergency fund for medical expenses and vehicle repair, and so on. But did you ever create a home repair emergency fund? You might think that home renovation is something which you often plan so the money can be arranged accordingly.
But you never know when you need to deal with a broken window, flooded drainage, out-of-order appliances, etc. In upcoming sections, we will describe what consists of a home repair emergency fund and 6 scenarios where you might need an emergency fund.
Home Repair Emergency Fund
It is a fund that is kept aside for unforeseen home repair expenses, as mentioned earlier. You don’t use this amount for other expenses. And you also don’t put in any long-term savings or investment scheme. Instead, you can keep your home repair emergency fund in a bank’s savings account with reasonable interest gain. The reason being, you don’t want to pay a hefty fee if you want to withdraw your money before the due tenure of the scheme.
Amount to Keep in Home Repair Emergency Fund
According to experts, you should ideally set aside 1% to 3% of your home value. Another formula can be the amount equivalent to the 3-6 months of your living expense. If your home is newly constructed, you can save this amount gradually from salary. On the contrary, older homes may present you with more unexpected home repair expenditure.
The Need for Emergency Fund for Home Repair
Following are the most common 6 scenarios where you will need some extra funds for repairing work at home:-
1. Replacement or Repair of Room
If your roof is leaking or showing cracks anywhere, address it immediately. You can probably resolve the issue at less cost. But if you prolong or overlook the problem, you need to bear the heavy burden of replacing your roof altogether. The expense of roof repairing or replacing may vary according to its size and required martial.
2. Broken Glasses of a Window
It is essential to repair broken windows at the earliest. A broken window compromises the security of your home. Moreover, there is a risk of injury with broken glasses around. Families with children need to be extra careful in this regard. However, its cost will not take much from your emergency fund.
3. Out of Order Water Heater
A water heater is an everyday need, especially in winters. If it goes out of order, you need to take out money from your home repair emergency fund urgently for its repair. Also, this electrical appliance works very closely with water. Therefore any leaking valves, broken thermostat, or corrosion in a water heater is a safety hazard for you.
4. Plumbing Issues
A burst pipe, water leakage, clogged drainage, leaky pipes, etc., cause significant trouble in your house. Amongst all these plumbing issues, the burst pipe is the mother of all concerns. If the water supply doesn’t stop immediately, a burst pipe can harm your furniture and walls. It is a significant expense, so having a home repair emergency fund in place can help big time.
5. Damage Caused by the Pests
Creatures like pests and rodents can come as unwanted guests anytime in your house. They can chew on your cables and chords, leading to a risk of an electrical accident. They have the potential to damage your furniture as well. Thus call for a good pest control company that can take appropriate actions like fumigation for pest control.
6. Repairing of Electrical Equipment
We don’t realise the enormous role of electric appliances in everyday use like refrigerators, washing machines, microwaves, etc., until they stop working. It would help to have an emergency fund where you can immediately take out money for their repair.
These are the most prevalent home renovation, repairing, and maintenance-related concerns. Apart from that, there are other areas like structural issues and electrical wiring which might crop up. Therefore it is crucial to keep a home repair emergency fund intact in your savings account to avoid delay in resolving these issues.
Aatish Khanna works with the Content Marketing team at Money Club – a digital chit fund platform that makes saving, borrowing, and investing your money more efficiently. He writes on topics to help his readers understand processes so they can make better financial decisions. He’s the go-to person that his family, friends, and colleagues turn to for all their money matters. He loves to play board games and aspires to one day build his one finance-related board game and app.