So what does an emergency fund help you with or rather why do you even need an emergency fund?
Life is full of risks and your emergency fund will happen to be your savior in times of such risks which will help in preventing you from taking loans or credit. Having an emergency fund, is a trait that a good financial planner always possesses. It is a monthly routine or a habit that he follows.
These are the following 3 key basics you need to know about your emergency fund.
- How to create an emergency fund?
An emergency fund can generally be compiled by an amount which equals to three months of your expenses. You can easily get this done by automating your savings, i.e, getting a small part of your savings transferred from one account to the emergency account. All you will have to do is just monitor whether this is done regularly, rest assured by the bank.
- Where to keep this emergency fund?
Just as you have a savings account, you can also create an emergency account which will pile up your funds and it will be an additional perk to you as you might as well earn some interest on your emergency fund account.
- Where to use the fund?
Make sure that the fund is used only during life emergencies such as a financial crunch, a family member’s urgent operation, or any other kind of hardship. Desist using those funds for casual expenses or the main purpose of building this fund remains unfulfilled.