Setting aside a portion of money can be great help during the worst time. People don’t know what is going to happen in the near future. Any sudden accident may occur and he may require emergency money for the treatment. So, emergency saving fund can help you during rainy day.
Employee may loss job anytime and he may take time to manage another job or one may dream to start own business. At the beginning of the business, there may be less or no income to maintain the family expenses.
These are few reasons, except those there may be lots of reasons for which we should have an emergency fund.
Now the first question is how much you should have for a rainy day fund?
It is better to save one month’s savings for family expenses. Calculate how much you need to maintain your monthly family expenses and then start to set aside a small amount of money for the rainy day fund.
When your one month emergency fund will be saved then now plan for another two months saving fund, means altogether three months family expenses shall be your emergency fund.
It will be safe to save your rainy day fund in a separate bank account so that you can not use the savings during your usual time.
It is expected that by these three months you will be able to manage another job or you will be able to generate income from your new business. Moreover, in an emergency, suppose any household item has been damaged like television or fridge you may use this rainy day fund to buy the new one immediately.
If you have any debt from a bank or relatives and require to pay loan installment then financial experts suggest to maintain six months savings. It will help you to maintain your family expenses as well as loan repayment.
When it comes to savings, the most common phrase we hear is “how I will set aside money from monthly income when it is difficult to maintain monthly expenses?”
It is suggested that if you are doing only one job then you can earn extra money by involving additional jobs after your main job.
Now-a-days most popular word is “passive income”. You may earn extra income by using your skills and this income will help you to set aside money for the rainy day fund. If you don’t have that opportunity then you may list down all your monthly expenses and follow for the next few months. Now identify which expenses are not necessary and try to avoid these expenses to save money for the emergency fund. This strategy will help to set aside money and will give you mental peace during an emergency.
No Comments