Why You Need an Emergency Fund and How to Build One

Introduction

An emergency fund is a stash of money set aside to cover financial surprises life throws your way.

Why Do You Need It?

• Job Loss: It buys you time to find a new job without stress.
• Medical Emergency: Covers sudden hospital bills.
• Home/Car Repairs: Unexpected breakdowns.

Without it, you might have to take high-interest loans or sell assets.

Related: The 50-30-20 Rule: A Simple Way to Budget Your Money

How Much to Save?

Aim for 3 to 6 months of your essential living expenses (Needs).

Example: If your monthly needs are ?30,000, your target is ?90,000 - ?1,80,000.

Where to Keep It?

It must be liquid (easy to access). Do not lock it in long-term investments.

• Savings Account.
• Money Market Fund.
• Short-term FDR.

How to Start?

Start small. Save ?1,000 or ?2,000 a month. Use windfalls (bonuses, gifts) to boost it.

Conclusion

An emergency fund gives you peace of mind. It turns a financial disaster into a mere inconvenience.