Emergency Fund: Nowadays many types of jobs are not permanent, and there is always a risk of losing the job. During the Corona epidemic, everyone saw a period of layoffs in companies. At the same time, millions of people lose their jobs due to the economic recession. Whatever the reason, after the loss of the job, the economic situation gradually starts weakening. In such a situation, people become obsessed with every penny.
However, if preparations are made in advance to create an emergency fund, then you get the courage to deal with such a situation. You can use this fund during a financial crisis. Today we will tell you how to create an emergency fund and how much you should save from your salary for this.
What is an Emergency Fund?
An emergency fund is a sum of money that you keep safe only for unexpected and essential expenses. It is kept separate from the daily expenses of income so that your financial situation is protected in case of an emergency. It acts like an economic security cushion, which helps you avoid stress in tough times.
Why is an emergency fund important?
There can be an unexpected expense in life at any time. A good emergency fund gives you peace of mind in such a situation. Especially when you need money urgently. Think of it like this: if you do not have an emergency fund, you may have to take a loan for sudden expenses. This debt can harm your financial health in the long run. Having an emergency fund can save you from getting caught in a debt trap.
Apart from this, it also helps in the event of a job loss. In today’s time, job security is not guaranteed. A good emergency fund can help you meet your everyday expenses without any stress in the event of unemployment. Apart from this, the emergency fund protects you from selling real estate. That is, when you have an emergency fund, in an emergency situation, you are not forced to sell any of your other investments without thinking, but use the emergency fund to come out of that problem.
How do I create an emergency fund?
Building an emergency fund requires proper planning and discipline. For example, set a goal of saving every month. Take out a part of this savings separately for the emergency fund. That is, after withdrawing money for your daily expenses from the salary you are getting every month, take out some of the savings left for the emergency fund and set it aside. Do not confuse savings and emergency funds; they should be different. Try to have your emergency fund at least more than your 6 months’ salary.
Where to keep the emergency fund?
Where to keep the emergency fund is a big question. Investing savings for the future is the right choice. But this is not the case with emergency funds. The emergency fund is there so that if you need money in the middle of the night, you can withdraw it. Therefore, if you want to invest it, then do it in a place from where these funds can be obtained immediately.
