What are emergency funds?
Few things you must know about Emergency Fund
Emergencies come unannounced, we all know it very well. No one can predict it. The only thing we can do is that we can prepare ourselves for any unforeseen emergency. An emergency fund is money that you put aside against life’s unexpected events. It is not to be used for planned purchases such as buying a house or new car or your child’s higher education.
Emergency fund helps to overcome emergencies like accidents, job loss, business loss etc. Hence, building an emergency fund should be the first thing on your mind before you start investing for your financial goals. So, here we discuss a few things that you should know about emergency funds. mutual fund advisor
An emergency fund helps you to be prepared with anything that life throws at you. These emergencies can be accidents, immediate house repairs, job loss or any other reason that comes uncertain. An emergency fund should be in liquid investments such as liquid funds or savings accounts.
Liquidity is the essential feature when it comes to emergency funds, as you would need the money at short notice. You should park two-thirds of your emergency corpus in liquid funds and the rest in a savings account. In case of short-term emergencies such as house repairs, you can withdraw money from your savings accounts. Take help from your financial advisor and invest some percent of your earning into emergency fund. The liquid fund can help you save for significant emergencies like job loss. Emergency funds create a financial buffer that can keep you afloat in a time of need without having to rely on credit cards or high-interest loans. It can be especially important to have an emergency fund if you have debt, because it can help you avoid borrowing more. Health insurance advisor
You can divide your emergency fund into 2 categories:-
1. Long-term emergency funds
This is where you save for large-scale emergencies like a major natural disaster or a sudden medical emergency. This fund should be invested in instruments that allow you to earn a slightly higher rate of interest but may take a couple of days to liquidate.
2. Short-term emergency funds
This is the fund you rush to in cases of emergencies. Such a fund should offer little in terms of interest but allow immediate accessibility, which in case of extreme situations can suffice till you gain access to your long-term emergency funds.
Conclusion
To summarize, emergency funds are the first step in financial planning. Building an emergency fund should be your first priority. Hence, it is okay if you have to cut your investments. You can use an emergency fund calculator or talk to your financial advisor to know how much you have to save in your emergency fund. Your financial advisor will help you to plan this entire process. So, start saving money for your emergencies today.
You can also visit following link :-
Mutual Fund advisor in Lucknow
Health Insurance Advisor in Lucknow
Comments
Post a Comment