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An emergency is something that never announces itself; you always have to be prepared. People have markets nearby, but they still keep about a month's worth of groceries at home because they might not be able to go to the store every day, or in case of an emergency, they should have enough food to last for about a month without worrying about running out. Some emergencies are very likely to occur in a person's life, such as health emergencies. For these, people have health insurance and other types of insurance. People prepare for all these emergencies in advance so that when an emergency arises, they don't face too much trouble. Now let's talk about an emergency fund. An emergency fund is a fund you set aside for times when your income source stops. For example, if you work for a company and suddenly there's a layoff situation and you have to leave the company, you should have some funds to survive for a few months and cover your essential monthly expenses.
Image by 3D Animation Production Company from Pixabay
This fund includes expenses that are recurring every month. For example, if you have children, their school fees, your grocery expenses, any medication costs, and bills for any other services you use. You have to add up all these expenses to create an estimate of how much you will need each month. Now, if I talk about my emergency fund, my plan is similar. I have added up all my monthly expenses and also included expenses that occur annually, and then I have saved enough funds for approximately nine months. I have calculated the total amount needed for these nine months. Of this nine-month fund, I have deposited five months' worth of funds into a fixed deposit account. I deposited it in a fixed deposit so that it also earns some interest. Of the remaining 4 months' worth of funds, I've kept 2 months' worth in a savings account, and the other 2 months' worth is kept in cash so that it can be used in case of an emergency. I deposited the 5 months' worth of funds in a fixed deposit because I already have a 4-month backup fund available, and if any such situation arises, I can easily withdraw the money from the fixed deposit since it's online, so I won't even need to go to the bank.
In addition, I've set aside some money for minor health emergencies that might arise, and also so I can provide some financial assistance if anyone in my family faces a health problem. Ideally, for health emergencies, you should have health insurance, which I do, but there are many health emergencies where health insurance doesn't cover everything, so it's important to have some funds set aside for such situations.
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