In life we don't know what will happen next so its very crucial that we're ready for any unexpected event that will come. There are several times in our lives that emergency arises and we don't know how to deal with it, when this kind of situation occur we must have backup to support us.
What is an emergency fund?
Emergency fund is a set aside money intended to use when unexpected situation come up like illness, job loss, car repairs and other expenses that really need to be settled. You must have easy access on your emergency fund, it's a must to consider putting it in a place where you can quickly pull your money like savings account though it offers a very low interest rate.
How much emergency fund do you need?
In building your emergency fund it should be enough to cover any emergency that may come up. At this point you're maybe asking how much emergency fund do you need? Well, it all depends on your monthly expenses. Many says that it should be atleast six months to twelve months. I think six months will be okay but saving more than six months will gives you peace of mind and feeling of security.
One of the most common situation one may experience is losing a job, it takes few months for an individual to get a new job. If you don't have emergency fund where will you get your daily expenses? It's not a good idea to use your credit cards or lend money from financial institutions as interest takes place. In this situation you can see how emergency fund makes a big difference in times of emergency.
Reasons Why You Need an Emergency Fund
- Job Loss
- Tax Bills
- Medical Emergency
- Home and Car Repairs
- Increase in Cost of Living
- Weather Disasters
- Moving Expenses
- Unexpected Event
- Some One Close to you Passes Away
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