Imagine this scenario: You arrive home exhausted after a lengthy day. As you approach your front door, you reach into your pocket for your keys, only to discover that they’re not there. Panic sets in as you realize that you’re locked out of your own home. Fortunately, there are locksmiths on standby to assist you in times like these. However, emergency locksmith services can come at a steep price, potentially costing up to $400 depending on various factors such as location, time, lock type, service, and trip fees. On average, Americans pay around $150 for locksmith services, according to This Old House, a trusted source for home improvement advice and information.
Sadly, the majority of American workers, a staggering 63%, do not have the means to cover a sudden $500 emergency expense. This alarming statistic comes from SecureSave, a financial technology provider that aims to help employers offer emergency savings benefits to their employees. Additionally, a Bankrate survey conducted in May 2022 revealed that only 48% of U.S. adults have enough emergency savings to cover at least three months’ worth of expenses. With a lack of emergency savings, individuals often resort to financing unforeseen expenses on credit cards or tapping into their retirement savings accounts. Vanguard reports that the number of 401(k) plan participants making hardship withdrawals reached an all-time high in 2022.
Furthermore, the Federal Reserve found that 32% of adults would be unable to fully cover a $400 emergency expense with cash in 2021. Instead, their most common solution was to use a credit card and make payments over time.
Financial advisor Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, explains that facing these situations has become increasingly common. Sun advises that people who find themselves in this predicament often don’t know where to start when it comes to handling emergency expenses.
Here are the average costs associated with other common emergency scenarios:
1. Car trouble: If you accidentally leave your car keys inside your vehicle, a locksmith can assist you. The cost for unlocking the door can range from $70 to $150 nationwide, depending on factors such as distance, time of day, lock type, and effort required. In some cases, rekeying the car door can even reach up to $600, as reported by J.D. Power. Additionally, if your car breaks down or you’re involved in an accident, you may need to call a tow truck. The average cost for towing a car is $109, but this can vary based on location and distance. In some instances, it can cost as much as $600 for a 100-mile tow.
2. Medical emergencies: Serious health-related incidents, such as critical illnesses, infections, or accidents, may require calling for emergency medical services or rushing to the nearest hospital ER or urgent care facility. The likelihood of these first responders taking you to a medical center where your health insurance is accepted is low. On average, an urgent care visit can cost up to $200, whereas a hospital ER visit can reach as high as $1,300, according to American Family Care.
3. Household repairs: Homeowners spent an average of $1,953 on emergency repairs in the previous year, with emergency spending experiencing a significant increase in 2021 due to natural disasters in Texas, California, and New York. Approximately 40% of respondents were impacted by extreme weather events, according to home services website Angi. Some of the most common emergency household repairs include fixing burst pipes, roof leaks, overflowing toilets, gas leaks, electrical hazards, pest infestations, and mold growth, as reported by home management platform Thumbtack.
To protect yourself from incurring exorbitant emergency costs, consider these alternative financial safety nets:
1. Use credit cards wisely: View credit cards as a last resort and make it a priority to pay off the balance in full each month. Failure to do so can result in substantial interest and a quickly accumulating debt. Use your credit card as a temporary bridge, but commit to paying it off promptly.
2. Set up a home equity line of credit (HELOC): A HELOC allows you to utilize your home’s equity as an emergency line of credit. Applying for a HELOC is similar to obtaining a mortgage and can provide a lower interest rate compared to credit cards. However, HELOCs often have variable interest rates, so it’s best to use them sparingly.
3. Look into roadside assistance coverage: Roadside assistance plans can be helpful when facing car-related emergencies, such as being locked out, needing a tow, or requiring assistance in mud, sand, or snow. Check with your auto insurance provider to see if they offer roadside assistance coverage or consider adding it to your existing policy.
4. Plan ahead to avoid surprises: Preparing for emergencies can save you from financial stress. For instance, if you have an older car with high mileage, be prepared for breakdowns by setting money aside in a car fund. Treat emergency savings as an investment in your own well-being and future financial security.
In conclusion, it’s essential to have a financial safety net in place to cover unexpected expenses. By utilizing credit cards wisely, setting up a HELOC, exploring roadside assistance coverage, and planning ahead, you can better protect yourself from potentially crippling emergency costs. And to avoid the frustration and expense of a locksmith when locked out of your home, consider keeping a spare key in a lockbox or giving one to a trusted friend or neighbor.
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