How much emergency fund to make? Today we will discuss these.
What is an Emergency fund?
You may be understand by hearing the name emergency fund that which fund is used in emergency time is called emergency fund.
God forbid that if you fall ill,you have had a major accident, you lost your job,or we don’t think which situation like your house broke down in natural calamity,or someone framed in the police case, then suddenly people needed a lot of money in those case.if you have emergency fund then you will benifit a lot in those time.
We are planning our happy moments and collect money but we don’t think about our sudden accident. So,we have to our emergency plan about our certain coming incident.
What should be done before making an emergency fund?
It is reality of our country that there are many family if their basic income person died then the family was destroy completely or will go. It is because lack of future planning.
Everyone should be done term insurance to escape from this predicament.
Term insurance is a type of insurance in which you will pay the premium and its will be sum assured and God forbid if you died on trum accident then the money will come to your nominees hand.
There are many parts of term insurance-
1. Regular term plan.
2. Return of term plan.
3. 100% refund of premium at no cost.
1. Regular term plan
You give a premium whose change is a big amount of money which will given to your nominee if you died on accident.
2. Return term plan
After the end of your policy term you will get back your premium.
3. 100% Refund of premium at no cost
If policy holder buy continue his term plan after a fixed age then he will get back his premium.
Besides it you will get extra benifit for these accident-
- Accidental benefit
- Critical benefit
- Income benefit
- Accidental disability benefit.
What is the budget of emergency fund?
Financial expert said that you should keep the money in emergency fund equal to you six months consumption.
In my opinion the average consumption of your 12 months from there create a 12 months fund with the money you need for minimum survival.
Now I tell you how you create a 12 months fund?
Everyone save the money from their won consumption. Choose a specific amount from the savings amount based on your income for emergency fund. Give some money in every month for emergency fund. If your conjumptions is 10000 in every month then 10000×12 =120000.
Now you decide that in how many years you can save this amount.
Where will you do emergency fund?
Don’t keep emergency fund in share bazar,mutual fund and PPF.
From where you can withdraw your money keep the money of emergency fund there.
Do your emergency fund where return is sure.
In my opinion the best option for emergency fund are follows-
Fixed deposit, liquid Mutual Fund, recurring deposit etc.
Don’t choose savings account as emergency fund.
Don’t choose those fund for emergency fund which was depends on market.
The upgradation of the emergency fund
The conjunction of every people are increase every year.such as if the price of one thing is 100 rupees in this year then the price of the things will be 130 to 140 in next 2 years. So you have saved the amount of money that is on year’s expenses for emergency expenses.but those amount of money will become less in this market. So don’t stop there and keep some money in your emergency fund as per your convenience.