Five reasons you need an emergency fund

The whole trouble could solve only if one is disciplined and determined to create an emergency corpus, before anything else.

Oct 29, 2014 12:10 IST India Infoline News Service

We all know, how having an emergency fund is crucial, but we neglect the urge each time, lingering the task to some other time. Something or the other take precedence over this basic task, as we deliberately put the thought on hold. But then emergencies show off without notice and one ends up drawing debt to meet the cash crunch. The whole trouble could solve only if one is disciplined and determined to create an emergency corpus, before anything else. As per a general rule, one should save six month's of income under this head, but one can save amount equivalent to expenses needed for three to six months. If in doubt then find out why one needs this corpus here: -
 
Sudden Layoff: Corporate world is unpredictable as one never knows when he/she could be get a pink slip. Till the time one finds another job, an emergency corpus will help to settle the monthly expenses.
 
Major medical costs: Complex lifestyles have raised health issues and the bills as well. It is possible that health insurance plans could become inadequate and would require additional funds. It is the time to draw from your emergency corpus.
 
Car goes to garage: Car, your main mode of transport, has broken down and needs an urgent fix, but the cost is excessively high. No worries as you can pull that extra money from emergency funds without the need of another debt.
 
Extending maternity leave: Corporates allow a fixed tenure for maternity leave, but what if you need or wish more time off from your work. While your company might agree to give leave without pay, an emergency corpus, then will take care of the 'pay' part.
 
Switching Cities or Country for job: It is more usual that your next dream job asks you to change your city or even country, then how would one will take care of the transportation, housing and other costs. Certainly, an emergency corpus will do the needful. 

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