Not sure why you may need an emergency fund when you’re getting a stable income from your highly paying job, and all your family members have enough medical insurance coverage? We tell you why you might just need it below:
1. Expecting the Unexpected
Your monthly income prepares you for what is expected. However, you need an emergency fund to help you during those events which you may have never predicted such as an unexpected illness or any other unanticipated major expense.
2. Safety Net
Emergency funds provide you with a safety net as they ease the burden off your shoulders. Imagine a day when you reach work, only to find out that you’ve been laid off — but you still have to pay your bills, your house rent and your child’s school fee! Without an emergency fund, you may take up another job, even if it isn’t the right one for you, just for the money. On the other hand, had you been prepared, you could have given yourself some time to find a job that suited your career goals best.
3. An Illness
Your ageing parents fall sick and their insurance cover has a clause that states that their hospital bills must be settled by you, since they are your dependents. This could end up being a big burden, considering the other bills you need to pay. With an emergency fund, dealing with such situations becomes easier.
The need for an emergency fund may not be only in such severe cases. Another example could be of a distant relative being in dire need of some money to pay off his medical bills which were unforeseen. You may not be prepared to pay for this unexpected expense, and that’s when your emergency fund may be useful.
How much should I be saving in my emergency fund?
The thumb rule when making an emergency fund is to save 6 to 8 months of your salary in the fund. This may not be the same for all families, but it is what is considered an ideal amount that could cover most emergency expenses. If you’re making about a lakh a month, 6–8 lakhs in your emergency fund may be ideal for dealing with the lack of a job, or even any other untoward situation that could arise.
Get to know the best tricks of how to prep an emergency fund HERE.
Upwardly helps you decide how much and where you should invest in an emergency fund for you to be able to meet an unexpected financial surprise. We offer you the best investment solutions that keep your money liquid, and at the same time, offer returns that beat inflation.
At Upwardly, we are dedicated to Helping India make better investments. Check out what all we have to offer HERE. With Upwardly, you will always have an umbrella for a rainy day!
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*All returns are indicative basis past performance. Actual performance can vary.*