Wondering whether you should park your cash into an emergency fund? We’re here to help you decide whether it’s a wise move.
Your future self will surely thank you for having an emergency fund in place. It’s important to set aside a portion of your paycheck to serve as an adequate cover during a financial or medical emergency.
Imagine this, what if you’re caught in a situation that puts you in urgent need of cash? How do you intend to continue having a strong financial footing in the face of cash crunches or unfortunate circumstances such as the loss of employment?
When you’re not enjoying s steady paycheck, how do you maintain consistency in the payment of your Personal Loan EMIs or outstanding Credit Card balance? An emergency fund is a sure recipe for fiscal fitness when going through a financially turbulent phase.
Additional Reading: 7 Important Questions To Ask Yourself Before Dipping Into Your Emergency Fund
Having an emergency fund in place is probably one of the surest signs of adulating done right! This article will help you figure out how much you need to save to be prepared for an emergency and what is the best way to go about it. Let’s begin!
What qualifies as an emergency fund?
Simply put, an emergency fund is an aggregated sum of money that is set aside to handle unforeseen expenses such as a medical emergency or home renovation. Believe us when we say this, having an emergency fund can make a world of difference to your finances.
Why should you have one?
With a robust fund in place, it’s a lot less likely that you’ll succumb to the horrors of a sudden financial requirement. While living from paycheck to paycheck can seem quite tempting, in the long run, it is certainly bound to deprive you of mental peace.
Having an emergency fund instills a sense of freedom. Let’s say that your job becomes dreadfully unbearable and you’re forced to leave even before you can begin looking for another one.
Additional Reading: Why Should Women Have An Emergency Fund
What if you suddenly realise that your 9-5 work life doesn’t agree with you and you’re keen on starting your own business? If you have an emergency fund, you’ll be able to make these decisions with a lot more ease.
If you have the reputation of a reckless spender, maintaining an emergency fund is one of the easiest ways to check frivolous expenses. Establishing an emergency Savings Account now is sure to have a considerable payoff in the future!
Additional Reading: The Importance Of Having An Emergency Fund In Place
How much should you save?
Well, ideally your fund should be substantial enough to cover your major expenses for atleast 6 to 9 months. Initially, it might seem quite daunting. Fear not and start small, even targeting 3 months is a good start.
Housing expenses including rent and maintenance fees; food and groceries; debt repayment; transportation costs; and personal expenses need to be considered. Once you’ve figured how much cover you need, the next big step is to plan towards achieving your goal.
Additional Reading: How To Put Together An Emergency Fund
Don’t know where to start? One of the easiest ways is to put any surplus cash such as income tax refund or a vacation bonus away as savings.
3 simple ways to establish an emergency fund
Take it one day at a time:
Pick a realistic number that you think you can save each day or each week. What’s important is to keep at it!
Additional Reading: 5 Simple Yet Effective Investment Options For Your Emergency Fund
Consider setting up an automatic transfer system from your checking account to your savings one. This is definitely going to be easier and you’ll surely save an amount without fail each month.
Make your funds accessible and don’t lock them up in accounts with a lock-in period! That way you can easily dip into them during emergencies, when strapped for cash.
Want to start an emergency fund? Kudos on making such a wise decision! Now you can keep yourself afloat during job changes or emergencies without having to grapple with financial woes!
Additional Reading: Tips To Handle An Emergency That Costs More Than Your Emergency Fund
If you don’t already have an emergency fund, now that we’ve told you why an emergency fund is a must, don’t you think that having one is a great idea? Well, what’re you waiting for? Begin saving now and you’ll be extremely glad that you did! Looking for other financial products? We’ve got you covered!