Should You Use Crypto for Emergencies?
Cryptocurrency seems like a good way to turn small investments into big rewards. Would you be able to use those rewards for emergencies? Find out why you shouldn’t rely on crypto for emergencies and what you should do instead.
Why Is Crypto Bad for Emergencies?
Crypto Volatility
Cryptocurrency is volatile, which is why it makes a poor choice to set aside for emergencies. You don’t know whether your investment will have a high value when an emergency expense crops up or whether it will be devastatingly low. You might not have enough to cover a fraction of the urgent expense.
Crypto Access
When you’re dealing with emergency expenses, time is of the essence. The faster that you can access the funds to cover the expense, the better. Cryptocurrency investments can’t guarantee this easy access.
You can’t access your funds from crypto immediately. You will have to exchange the investment into US currency and then transfer that money into your personal bank account. If you use a third-party broker to conduct your exchange, this process could take days to complete.
Investment Loss
Of course, you could lose out on a great investment by withdrawing it for emergencies. You don’t want to put yourself in a position to withdraw your investment because you’re desperate for the funds.
What’s a Better Solution for Emergencies?
If you’re not going to use cryptocurrency for emergencies, what can you use? These are some effective, accessible options.
Emergency Fund
The best way to handle emergency expenses is with the help of an emergency fund. An emergency fund is a collection of personal savings reserved specifically for urgent, unpredictable expenses. These personal savings should be stored in a savings account, completely separate from other savings for college funds, retirement funds, and other future goals.
One of the biggest benefits of an emergency fund is that it’s easily accessible. As long as you have enough in your fund, you can immediately withdraw the necessary amount of savings to pay for your urgent expense. There’s no need to wait.
If you want to help your personal savings grow, you shouldn’t invest it in cryptocurrency. Instead, put your emergency fund into a high-yield savings account or a money market account. Both of these accounts allow your savings to grow with interest. While the rewards will be slower and smaller, they don’t come with the risk of volatility that crypto does.
A Personal Loan
If you don’t have enough savings sitting in your emergency fund, you could apply to a personal loan online as a solution. With an approved personal loan, you could use borrowed funds to cover the expense in a short amount of time. Once you pay off the expense, you can follow a steady repayment plan.
Not all online loans will be accessible in your home state. So, narrow your search to loans that are specifically available in your location. For instance, you should look for personal loans in AZ if you live in Phoenix or Sedona. You can be sure that these options will be accessible to citizens in Arizona.
Read More: Why Some People Are Still Sceptical About Investing in Crypto
A Credit Card
When your emergency fund is empty, you can also turn to your credit card for help. Add the emergency expense to your card. Afterward, you can pay down the balance through your regular billing cycle.
Only use your credit card when your balance is far from the limit. You don’t want to push your balance too close to the edge and max out your card.
Your crypto investments are not meant for emergencies. Find a better solution to cover urgent expenses.
Pranab Bhandari is an Editor of the Financial Blog “Financebuzz”. Apart from writing informative financial articles for his blog, he is a regular contributor to many national and international publications namely Tweak Your Biz, Growth Rocks ETC.
