Building fund for Emergencies (Rainy Days)
Octobe 11, 2023
DD Planet
Emergencies can strike us any day, be it a medical emergency or a job-loss or an unforeseen repair works or death of a close kin. We need to prepare for such rainy days and create a significant fund to easily sail through it.
Here are the tips and advice to help you build an emergency fund:
- Decide how much should be your emergency bucket considering your lifestyle, monthly expenses and cost of living at the place you live.
- Make savings a habit. Keep aside a certain percentage (even if it is as small as 1 or 2 percent to begin with) of your income every month for an emergency fund until you reach your goal.
- Prefer opening a separate account or investment for your emergency fund. If you’re lazy in financial tracking, choose an auto-sweep facility to create such a fund so that the required amount gets invested automatically every month.
- Do not keep your emergency money idle. Invest it suitably and regularly.
- Depending on your age, career level and responsibilities, you need to have an emergency fund that could vary from six months to 2-3 years of your monthly income.
- Be disciplined and contribute regularly.
- Reduce allocation in the emergency fund once you’re close to your target and take a hiatus once the goal is achieved. You need to, however, continue analysing your emergency bucket so as to top it up every time your situation changes.
