‘Hard to swallow’: These Utah homeowners went to court over leaky windows, roofs — and lost, now they face a big HOA hike to fix their damaged homes. Why an emergency fund is a must

What happened?

A letter from the HOA board to Daybreak homeowners apologized for the sharp increase.

“We recognize that additional financial obligations are unwelcome, especially during these economic times, and we did not make this decision lightly,” the board’s letter said.

These days, about 30% of all homeowners are part of a HOA. And while HOAs can take care of maintenance, provide a sense of community and keep property values high, they can also spring surprise fees that can cause a homeowner’s budget to balloon.

While many homeowners assume their HOA will take care of anything that crops up, that’s not always the case. Not all HOAs have enough reserve funds to cover unexpected catastrophes.

Occasionally, major repairs that need to be dealt with urgently call for an influx of cash. HOAs get that cash through imposing special assessment fees. And if your HOA imposes a special assessment fee, it is your responsibility to cover, even if it puts a strain on your budget.

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Why you need an emergency fund for home repairs

Having an emergency fund to handle these types of surprises can ensure that you don’t have to take out a loan or risk losing your home.

First, you can start building up an emergency fund by evaluating your current savings and comparing them to your current necessary expenses. To build your emergency fund, cut out anything extra or discretionary. You can also try to get a side hustle, work overtime hours or start freelancing.

A basic rule of thumb says you should save three months of expenses. However, having closer to six months in reserve may be better if you have kids, an unstable job or a home. Even having an HOA doesn’t mean you’re off the hook for other potential problems, like needing a new water heater, air conditioner or furnace.

Home-related problems aren’t the only reason to have an emergency fund. If you lose your job, an emergency fund can cover your expenses while you look for a new gig. If you have to attend a last-minute funeral or be a caregiver for an ailing parent, an emergency fund can cover travel and help you afford to take time off work.

Remember, you don’t need to save three months of income — you need three months of necessary expenses. Include every expense you would have to pay for and exclude anything you could temporarily live without, like your gym membership or your monthly massage appointment.

Once you start building your emergency fund, you should park it in a savings account, especially a high-yield savings account. While it may be tempting to invest your emergency fund, you need to keep it liquid.