Your bike meets with an accident and the mechanic says that the repair charges will come up to a few thousand rupees. Being a student, you may not always have so much cash in hand. Most likely you will either depend on your friends/parents for funds or swipe your Credit Card. But what if you had an emergency fund at your disposal in such a situation? That sounds really interesting, right?
The next question is how to build an emergency fund while repaying your Education Loan? Well, it’s possible to build an emergency fund even while paying your loan EMIs by just improving your savings plans.
You can start building your emergency fund while repaying your Education Loan by following these small tips listed below:
Setting up a personal goal helps!
One of the basic rules to set up an emergency fund is to save three months’ expenditure on rent, food, Educational Loan premiums, transport and other utility charges. So set up a personal goal for saving a certain amount of money every month after calculating your monthly expenditures. No matter how tempted you are to overspend in a month, make sure to save the minimum amount that you promised yourself! Keep it aside at the start of themonth!
You can transfer any surplus amount in your savings account to your emergency fund every month to build up on your savings. Additionally, in case you get some cash rewards or monetary gifts from your relative/friend on your birthday, you can transfer the same to your emergency fund. Cashback rewards from your Credit Card expenditures can also help!
Understanding the Purpose
You need to understand the value and importance of building an emergency fund. You need to realise that it’s meant to fund your emergency needs, and it’s definitely much wiser to use cash from this fund than swiping your Credit Card.
If you swipe your Credit Card randomly for all your financial emergencies, then you will end up with a huge bill and outstanding amount on your Credit Card, which is again not a very wise thing to do. It may affect your credit history and have a negative impact on your CIBIL score, which in turn will jeopardise your chances of applying loans in the future. Most banks might also reject your loan application owing to bad CIBIL scores.
Instead, using cash from your emergency fund is a much better option since it will not mean any additional EMIs for you!
Once you develop the healthy habit of saving money for your emergency fund, you can also pay some extra money towards your Education Loan as well.
Follow these simple steps to build an emergency fund while repaying your Education Loan, and you could definitely become a smart investor in the future!