Why is an Emergency Fund Important?
An emergency can strike anytime anywhere without any notice, you cannot avoid it but you can be ready for it. People who have faced these emergencies can tell you how the emergency funds helped them or how difficult it was to do the expenses without any emergency funds. So if you don’t want to end up facing financial troubles, see why you need to set up an emergency fund.
What and Why?
An emergency fund is an amount that you can access easily in the time of need that you can set aside for some unexpected events. These funds can help you to go through difficult times like losing your job or some medical emergencies. You can save money in this fund similar to any other policies like the insurance and can access it easily whenever needed instead of waiting for insurance companies or anyone else.
How much do you need?
We understand the significance of an emergency fund but how can you determine how much is enough for you? Experts say that having a saving equivalent to your salary for three months should be a good start. Of course, there is no limit to it but keeping a lot of cash on hand expecting to use it in an emergency is not a good option either. So plan accordingly and keep some cash on hand and invest remaining in short-term investments that can come in handy when you need it. There are a few easy options to choose like using the automated trading robot Ethereum Code that can provide you good investment option and you can pull out your investments in the time of need.
When to use this fund?
When you have some amount on hand you can be easily tempted to use it for other purposes like a short vacation or a new phone or car. Sometimes you might come across circumstances where you might want to use this fund instead of getting into debt. So when saving this amount aside, make a list of items you want to use this fund for and subdivide these funds if required. Make sure these are real emergencies like some serious illness, emergency vehicle or house repairs, damage due to natural disaster or theft etc. As medical emergencies are those where you definitely don’t want to go looking for funds when you or your family is suffering. Try and avoid using this fund when you can borrow money from some other sources without spending too much money on interest.