We are living in a financially vulnerable world. We don't know when we need huge money at a shot to meet any emergencies. In such context, financial advisers always recommending to have an emergency fund in a separate account. It would be a good idea to keep an amount equal to your 6 months expenses as your emergency fund for family. There are lots of reason why an emergency fund is mandatory for us.
1. Immediate Job Lose
2. Unexpected accident
3. Unexpected hospitalization
Above are few occasions but if occurred, it expected to have enough money in your hand readily. Here are some ideas and steps to create emergency fund that you need.
1. Bank RD: In this method, you can open a Recurring Deposit facility associated with a bank account where your salary to be get credited in each month. Set a percentage of amount in each month to move to the RD. This would gradually build required emergency fund.
2. SB Account Sweeping: Through a sweeping facility enabled account, any money in your account come as surplus than minimum required balance will get transferred to a separate account dedicated for emergency fund. Contact your bank for getting further details on sweeping facility.
3. Liquid Fund SIP: You can open an SIP (Systematic Investment Plan) with any good liquid fund to transfer a particular amount each month from your bank account. Liquid fund provides security as well as growth better than savings account.
4. Gifts and Bonuses: Utilize gift in the form of money and bonus from salary for the purpose of emergency fund. You can deposit such money to your emergency savings account.
5. Allocate through Monthly Budget: You may have a list of bills to pay at the end of each month such as electricity, water, internet, utility etc. Consider your emergency fund contribution as the one among this.
6. Piggy Bank: Comparing to above, savings through piggy bank may small but also can contribute to your emergency fund creation, and to a great extend.
7. Practice various money saving techniques and such savings can be contributed to Emergency fund requirements.
1. Immediate Job Lose
2. Unexpected accident
3. Unexpected hospitalization
Above are few occasions but if occurred, it expected to have enough money in your hand readily. Here are some ideas and steps to create emergency fund that you need.
How to Build an Emergency Fund?
Emergency fund can be build through a number of ways. It varies from gradual process to depositing a lump sum amount. Here are few practical ideas to create an emergency fund.1. Bank RD: In this method, you can open a Recurring Deposit facility associated with a bank account where your salary to be get credited in each month. Set a percentage of amount in each month to move to the RD. This would gradually build required emergency fund.
2. SB Account Sweeping: Through a sweeping facility enabled account, any money in your account come as surplus than minimum required balance will get transferred to a separate account dedicated for emergency fund. Contact your bank for getting further details on sweeping facility.
3. Liquid Fund SIP: You can open an SIP (Systematic Investment Plan) with any good liquid fund to transfer a particular amount each month from your bank account. Liquid fund provides security as well as growth better than savings account.
4. Gifts and Bonuses: Utilize gift in the form of money and bonus from salary for the purpose of emergency fund. You can deposit such money to your emergency savings account.
5. Allocate through Monthly Budget: You may have a list of bills to pay at the end of each month such as electricity, water, internet, utility etc. Consider your emergency fund contribution as the one among this.
6. Piggy Bank: Comparing to above, savings through piggy bank may small but also can contribute to your emergency fund creation, and to a great extend.
7. Practice various money saving techniques and such savings can be contributed to Emergency fund requirements.
Practical Ideas to Build an Emergency Fund: A Nutshell
- Start Small: Begin by setting achievable savings goals.
- Budgeting Basics: Allocate a portion of income for emergencies.
- Automatic Savings: Use automatic transfers to build your fund consistently.
- Emergency-Only Funds: Avoid using this money for non-urgent expenses.
- Three to Six Months: Aim for savings equal to three to six months of living expenses.
- High-Interest Savings: Opt for accounts offering competitive interest rates.
- Cut Unnecessary Expenses: Trim non-essential spending to boost savings.
- Side Hustles: Explore part-time work or freelancing for extra income.
- Sell Unused Items: Convert clutter into cash for your emergency fund.
- Financial Windfalls: Direct unexpected bonuses or tax refunds to your fund.
- Regular Review: Assess and adjust your savings plan as needed.
- Insurance Coverage: Ensure adequate coverage for health, home, and car.
- Separate Accounts: Keep emergency funds separate from daily spending accounts.
- Financial Discipline: Avoid impulse purchases to prioritize savings.
- Peace of Mind: Build an emergency fund for financial security and peace of mind.
