Emergency funds are the best way to avoid this sudden onset of life.
Photo: Emergency funds are the best way to avoid sudden problems in life.
One thing is clear in the daily life of each of us. That is, danger never comes. We all spend the day in an invisible confinement until we wake up in the morning and go to bed at night. Even if we have a lot of money or a good mind, this uncertainty is not cut at all. Whether it is treatment or any other need, raising a large sum of money for a problem that arises suddenly seems to be a misfortune. In such a situation, even if the temporary problem is solved by using the savings saved for the future, the problem arises elsewhere.
When the situation suddenly becomes complicated, money starts to be spent like water. At one time nothing was left for the next day. In fact, the purpose for which the money was saved remains unfulfilled.
Emergency funds are the best way to avoid this problem that suddenly arises in the course of life. In investment terms it is called Emergency Fund.
These funds hold emergency savings as well as future savings. Reviewing the statistics, it can be seen that emergency funds play a very important role in the life of each of us to meet the problem of future financial crisis. If you can save this fund through prior planning, you will have enough time to deal with any situation. Apart from that, contingency fund can also be considered as an investment. This is why everyone should have an emergency fund according to income, expenditure and savings.
Remember, we are all more or less aware of our future. Every person invests some money from his monthly income in various sectors for the future by deducting household expenses. In addition to those investments and expenses, contingency funds should be included in the list of future plans
How to Create an Emergency Fund?
When creating this fund, care must be taken that the money in this fund cannot be spent for any reason other than emergency or emergency. It is better not to keep it in the savings account. With these two main points in mind, the fund needs to be created with perfect balance. According to experts, no problem lasts more than six months. During this time most of the time the danger goes away or we find a way to solve the problem.
The basic rule of the emergency fund is to deposit six times your monthly income in this fund. This emergency fund should save enough money to run the household for at least six months. In other words, if the monthly expenditure of a person is 50 thousand rupees, he has to keep three lakh rupees in the emergency fund. Having an emergency fund will also help achieve short-term goals. This savings can be used to cover business compensation, medical expenses or financial difficulties.
Emergency funds need to be invested in places where money can be easily withdrawn. Cash can be deposited in a general savings bank account from where money can be withdrawn from an ATM using the card at any time. It can also be invested as a liquid mutual fund. Because the money from this fund is only invested in money market securities.
This is why the risk in this investment is very low. Emergency funds can also be deposited in the form of fixed deposit or recurring deposit.
Like any other fund, this urgent fund can be divided into three categories – short term, long term and medium term. An investor can invest in all these different funds by analyzing the market. Remember, danger comes suddenly. That’s why we should all be ready. At least financially.