Life is so uncertain that you cannot control many things. What if you get into a sudden unexpected crisis? Obviously, you get tensed. You look around for help. You approach people for aid. But not every time people would be in a position to extend a lending hand. So, you have to be mentally and financially strong enough to deal with it, all by yourself!
As the saying goes, ‘self-help is the best help’, it is wise to be prepared to help yourself, especially at the time of an emergency. The best way to achieve this financially, is to build an emergency fund and get adequate insurance. Read more to learn ways to keep yourself prepared for emergencies in life.
Emergency fund is a corpus saved for emergency needs. Create the money needed for emergency by gradually accumulating from what you earn. The amount you need to accumulate depends on your household expenses. So, calculate as per your needs and keep adding cash towards it.
Consider below things for building an emergency fund
- Keep cash required for a week’s expense at home
- Set aside the cash required for a month’s expense at bank
- Keep cash required for a minimum three months as emergency fund
- Park your emergency funds in different locations
- Do not use an emergency fund for non-emergency purpose
- Ensure that the fund does not lack liquidity
Tips for accumulating the emergency fund
- Add some percentage of income regularly to the fund
- Make saving a habit and divert it to the fund
- Free up cash by restricting entertainment expenses
- Add your gift amount or bonus to the fund
Get expert advice for channels wherein you can park your emergency fund, so that they are not easily accessible for you to take out, still have high liquidity. ArthaYantra provides online platform for channelizing your money.
Insurance plays a vital role in mitigating losses. Invest in a cover to shield against an emergency. Contributing money towards insurance cover on quarterly basis, would not allow you to pull money when needed. Your insurance itself covers it all. Consider insurances that cover
- Life (term insurance)
- Disability or Accident
- Health (medical insurance)
In a nut shell, create emergency funds and buy insurance covers to deal with emergencies. The emergency fund should help you pay your expenses for at least three months. This does not mean that you have to put aside your three-month salary. Rather, the fund should be built, gradually!
Build a shield to protect yourself and your dear ones from emergencies in life!!