WHO REALLY NEEDS EMERGENCY FUNDS, ANYWAY?
Remember during the pandemic when the whole world stood still and the economy came crashing down? We had to spend money on a lot of things like stocking up on food items, sanitizers, nose masks, and tons of disinfectants but money wasn’t coming in. That was a classic case of an emergency and a lot of people and even countries had to dip their hands into their emergency funds.
Emergency funds are an important part of any financial plan. They can help you avoid medical emergencies or other unexpected costs, and they’re also a great way to build your savings for the future. But what exactly are emergency funds? And how much should you have saved up for them?
What is an emergency fund?
An emergency fund is a stash of cash that you can use in case of an unexpected expense—like a sudden car repair or health issue, or even just replacing your lost phone. It’s different from a savings account because the money in it isn’t meant to be used for anything except emergencies—whereas money in a savings account could be used for things like vacations or buying a house.
How much should I have saved up in my emergency funds?
It depends on your situation and how much risk you’re willing to take with your finances. If you want to cover every possible unexpected expense, then it makes sense to have six months’ worth of income saved up as an emergency fund. But if that sounds too risky for you, then aim for three months’ worth instead.
The world has a way of changing overnight and your finances are no exception. An emergency fund is an important part of every household budget, and it’s one of the first things you should be working on when you create your budget.
Why You Should Have An Emergency Funds?
There are so many reasons why having an emergency fund is important! Here are just some of them:
-It will help prevent debt from building up over time
-It will give you more control over your spending habits by giving yourself options when unexpected expenses arise
-It will give you more control over your life overall by making sure everything runs smoothly when things get crazy outside (like during natural disasters).
The ABC of Emergency Funds
A is for Account.
You should have one that’s dedicated to this fund. That way, you’ll be able to keep track of how much money you have and how much more you need to save.
B is for Budget.
If you want to make sure your savings will last through an emergency, you’ll need to take a look at how much money you’re spending every month and determine how much can be saved each month without causing problems in other areas of your life.
C is for Comfort Level.
Consider whether or not your comfort level will allow for some wiggle room when it comes to saving up enough cash for an emergency fund. If your job is unreliable or if other factors could cause financial difficulties, it might be worth looking into finding ways to increase your savings amount while still being able to live comfortably during normal times.
If you have an emergency fund in place for yourself, it will give you peace of mind knowing that if something happens—whether it’s a major car accident or a leaky roof—you won’t have any financial trouble getting back on track again.
Yours in financial independence, Temitope.
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