Benefits of Emergency Funds: Life is full of uncertainties. No one can say what will happen here. When will a problem come in a person’s life. For this he will need money. In such a situation, when people suddenly need money, then people look for their relatives or their acquaintances.
We call them. But at the time of need, no one picks up the call. No one comes to help. In such a situation, emergency funds come in handy. So let us tell you in which things emergency funds can be used. How can you plan for this.
How big should the emergency fund be?
It is important for you to understand this thing about emergency fund first. There is no fixed fund here. Emergency fund means money for things that come in handy at the time of need. Now the second question is how big should the emergency fund be. So it depends on your need and your expenses.
According to Paisa Bazaar’s DGM Communication Navneeta Srivastava, your emergency fund should be at least 6 times your monthly salary. But it can be more or less according to your needs. If someone in your family has any medical condition, then you can increase the fund accordingly.
Invest in a place where you can withdraw it easily
It is very important to keep one thing in mind about emergency fund. This is not a saving scheme or money deposited for savings. This is a fund to be used in emergency situations. That is why invest money for emergency fund in such a place where you can easily withdraw money. You do not have to pay any separate charge for this, like savings bank account, FD, recurring deposit or mutual funds. Invest in such a place where you do not have any problem in withdrawing the fund whenever you need it and your deposited fund keeps on increasing with time.
Use it in these circumstances
- You can use the emergency fund at such times. When there is a very difficult situation or some expense has come up suddenly. Like if you suddenly lose your job and the source of income stops. Then using the emergency fund, you can manage the household expenses, food items, loan EMI and expenses on essential things.
- It can be used for sudden and urgent expenses. For example, if you need to get your house repaired or a vehicle repaired, if you have not saved money for it in advance, then you can use the emergency fund.
- Family is the most important part of everyone’s life. If any emergency situation suddenly arises in your family, like someone dies, then all the necessary expenses during that time can be met from the emergency fund.
- People spend a lot of money in medical emergencies. There is no way of knowing about any disease or health issue. If a medical emergency arises, then in such a difficult situation, you can use the emergency fund.
Also read: From Shahrukh Khan to Dhoni, everyone paid advance tax, know what are the benefits of doing so