All About Emergency Funds

why you need to set up an emergency fund.


Several things are out of your control. Cars break down, phones stop functioning, people get fired etc. Unpleasant things happen to everyone once a while. Life presents us with a lot of surprises. You should be prepared for anything. All these problems can be handled better if you have enough money to solve them and stay afloat. This is why you need an emergency fund.

An emergency fund is a fund set aside for unforeseen circumstances. It’s the umbrella which shields you on a rainy day. The perfect financial buffer for unplanned events – from the day-to-day minor incidents to problems like losing a steady source of income.

Financial experts advice saving enough to cover between 3- 6 months of your expenses in the fund. If you’re transitioning from a full-time job to full-time entrepreneurship, you need to have an emergency fund to keep your head above water and not run into debt immediately. You decide how much you will need. Take small leaps and stay saving towards it.

Open an emergency fund. Choose either a savings account or mutual fund. Mutual funds give you a chance to withdraw at any time and make a good interest whiles being kept as compared to savings accounts. Whichever one you settle for, make sure it is easily accessible. Automate the amount to be kept in the fund. Take baby steps, keep it easy and progressive.

The goal is to be able to face the problems life throws at you with confidence. Having an emergency fund doesn’t mean you expect bad things to happen but just in case they do, it acts as your life support. The alternative could be running into debt to solve those problems. It’s better to be safe than sorry.

Also published on Medium.