I hope you know what is the meaning of Emergency Fund. Are you planning to Create Emergency Fund but don’t know where to invest to get maximum return on short period of time? Do you think chit funds and trusting to your friends scheme will give you the best return for a short period of time? Have you ever analysed the risk factors while creating an emergency fund?
In this article I will try to share few tips to Create Emergency Fund and manage your personal finance properly. But do you know how much money should you save for emergencies? Let’s try to find out that.
Why Need To Create Emergency Fund
First of all what is Emergency Fund? This is a surplus amount in your bank account or some savings scheme which you will use for any planned expense purpose in future or may be some unplanned as well.
Now how come a planned expenditure be consider as emergency fund? Let’s say you are planning for your kids school admission, or planning to buy a car after 6 months, or planning to operate your father after 3 month etc.
Now besides these, there are certain expenditures which can come all of sudden. E.g. in case you lose your job, will your family be able to survive for next 6 month if you don’t get any salary? How will you pay your home loan EMIs, car loan EMIs, Personal Loan EMIs if any?
So, the bottom line is you should be able to create some back up so that in case of any emergency situation you can handle the financial pressure without feeling the heat.
How to Create Emergency Fund – Tips & Tricks
How much money should you save for emergencies? The answer could be, around the 6-12 times of your monthly income.
Do you think this too tough to manage? Yes, it will be if you think. But if you plan accordingly and save slowly than you can be able to save this much money easily. So what are the investment options available to make emergency fund?
Simply invest in short term Fixed deposit schemes, Recurring deposit schemes or keep it in your bank account only if you are getting higher interest rates. The thumb rule here is, you should not be trapped into the locking period and things should be flexible so that you can withdraw your money anytime. In case you are planning for little longer time then I think debt funds and mutual fund investment can be included in this picture. buying gold could also be a good option.
But try to avoid chit funds, direct investment in any business for monthly higher interest rates or other quick schemes. You may loose your money end of the day.
Share your strategies about creating emergency funds and how you are managing your personal finance profile in that case by writing a simple comment below.