Emergency Fund: Your Financial Shield
Life gets unpredictable, with unexpected medical bills, urgent repairs to a home or breakdown of a car. You also get to have one little emergency fund to keep you safe; a safety net you can count on and an emergency cushion, a tool to save you money in other ways.
Having this fund allows you to handle life’s surprises with low stress, allowing better financial decisions to follow when emergencies arise. It’s advised by experts that you save enough to manage your major living expenses, like rent, groceries, utilities, transportation and debt payments, throughout the next 3–6 months. The amount will vary based on your lifestyle, employment stability and financial responsibilities.
Building Your Fund Gradually
This can be overwhelming to newcomers, but it is an easy and gradual means to keep going in small increments while you develop your fund. In the long term, even small and consistent, but often constant contributions will add up to something of a big safety net.
“Make sure that your budget is conservative and that you keep your funds set aside, even if it’s modest, on a certain set value every week or month, and treat it as an essential component to your budget,” he said.
If you can automate these contributions, it reduces the hassle of saving money by getting the money from an account and deposited to one with a special savings account before you invest it.
Strictly for Emergencies
It’s so important that this fund is strictly for emergency funds – don’t spend your money on non-essential items or lifestyle upgrades. It’s also about less financial distress, after all. Without them, unexpected costs will force you to depend on debt from very high-cost loans or into credit, leading you into cycles difficult to break.
A well-prepped emergency fund ensures you can face any unforeseen circumstances with full confidence and therefore it's easier to keep on track in achieving long-term financial objectives.
Keep Reviewing and Adjusting
As your situation changes, periodically check in on your emergency account. If available, step up contributions, or make more room for the changes in costs to keep coverage level. The discipline of keeping up this fund helps you budget more, better budget yourself as a consequence, and planning for your spending habits better going forward.
Tip of the Day
Begin with small, doable amounts, say ₹100–₹500 per week. Just build up your fund of savings as your income and spend increases or falls. Consistency is everything — you’ll gradually build up an emergency fund with a strong cushion that shields you from the storm on any given day when things don’t go your way.
