Why emergency fund is important?

The key points are:

• What is an emergency?
• How to build an emergency fund?
• Why is important to keep an emergency fund?
• Can I invest in my emergency fund?
• Where to keep emergency funds?
• How much emergency fund is enough?

• What is an emergency?

                               Your future will be safe to establish an emergency fund. Because life is full of unexpected events. So need of emergency fund is necessary.

 An emergency is the best solution to any unexpected loss, like loose a job, breaking down of cars, or you have to pay heavy taxes.

An emergency fund allows you to cover medical expenses and get out from debts. Emergency helps your peace of mind and gives you the confidence to cover expenses like rent and utility expenses.

• How to build an emergency fund.

                                                    Calculate your monthly income and your expenses. Make a monthly budget. Use the calculator to estimate the exact figure out, how much you need. Financial expert says you have three months to six months equal amount for emergency purposes. Suppose you set an amount of $ 15000  you save $ 1000 for each month and your target to achieve in fifteen months.

For this purpose, you save $ 1000 from your salary to accumulate the sum of money of $ 15000.                                                     

• Why is important to keep an emergency fund?

                    Money must be saved for the future. It is compulsory for any emergency needs, like loss of a job, heavy taxes, serious illness, or any unforeseen medical expenses.

Also,if you have an emergency fund, you have to be confident in worse conditions. Especially, it is an emergency fund is important, if you have debts, this will help you to out from debts.

These days coronavirus spread to all countries, the emergency fund importance has increased.

The emergency fund is the most important thing to set aside some income for yourself.

• Can I invest in my emergency fund?

                        If you have extra funds for more than six months of expenses then you should invest this amount in a stock exchange or any other kind of business. Savings in a bank account where you earn few dollars, but I suggest you invest in real estate business which is increased day by day.How to invest money read more.

If the investment is fairly liquid, where you withdraw your amount easily.                                       

• Where to keep emergency funds?

                                                  I suggest you keep in your current account your emergency fund because you can easily withdraw your money. You should keep your reserve fund in short-term investment.

Another high yield saving account gives you a facility to keep balance and earn high-interest rate and easy access to balance and can transfer money to another person.

You save your emergency fund where you quickly access and it is also safe. Your money has not been saved from inflation, You are losing your money from year to year. So you invest your money.

• What should the emergency fund cover?

                                                        Emergency funds cover all your unexpected expenses. It is to cover the repair of the car by accident damage and also repair of the house. Emergency fund cover in case you are unemployed.Emergency cover to insurance expenses and transportation expenses. This fund covers your extra marriage expenses. Emergency funds cover everything and give you a solid financial ground.

• How much emergency fund is enough?

                                                                 Start small even a single penny every month. Then you increase according to your income. If you are doing the job, then three months' salary is enough. If you are self-employed then at least six months expenses.

Start this fund today, so you will breathe easier and would be a safe place early. It is a reasonable time to calculate six-month expenses for urgent needs.

If you have no extra money to set aside, then you earn more and more. But if you have no time for them you cut out your expenses. So you save money easily.

[Read: Passive Income]

Conclusion.

                     Seriously you should take action to create an emergency fund. So create a budget and make a plan in mind and start saving today. You will be amazed, at how much money you sum up in a short time. Set a monthly goal budget and then jump to the next step. 

If you are saving for the goal to start a business or to buy a house, the emergency fund helps you to meet your goal. An emergency fund is a great way to protect your savings. Emergency helps you to long-term financial goals.

If you are working in a secure company then it is good to maintain an emergency fund. Is your job safe? If not then an emergency fund helps you to get more jobs quickly.

I look forward to your comments in the comment box.

Tags: Emergency Fund,Personal Finance.