Emergency fund; increases your financial security against illnesses, accidents and unemployment.
Imagine you’il be out of work for the next few months. Have you made any plans about how you can meet your mandatory needs such as food, especially your bills? Have you taken any financial measures for emergencies such as health problems?
There is a very effective measure you can take before you encounter such situations. An emergency fund that you can create from today will help you to easily stand out from any future emergency situation. More importantly, everyone wants to feel safe against similar situations.
In this publication, I will tell you what the emergency fund is, for what purposes you can use it, and how to create an emergency fund.
What is an emergency fund?
An emergency fund is an amount that you can use in case of emergency in your bank account, which should be on the sidelines for business loss, illness or significant expenses. The emergency fund can be used in emergencies as well as to cover high interest debts and to cover mandatory expenses during periods of financial tightness.
The emergency fund should be created because it increases the financial security of individuals.
How to create an emergency fund?
The emergency fund should be established in an amount sufficient to cover your three-month mandatory expenses based on your monthly mandatory expenses. For example, if you have compulsory 1600 pounds each month according to your budget plan, your total three-month compulsory expenses would be 4,800 pounds. In such a case, you must create an emergency fund at least 4,800 pounds.
When creating an emergency fund:
I would like to mention a few important points that you need to pay attention to when setting up an emergency fund and I hope it will work.
Determine your needs
Usually emergency funds are created for quarterly expenses, but you can increase this time according to your needs. In the long term, it may be more advantageous to create a fund for financial security that will cover your expenses at least 3, average 7-8 months. It is important that you have the cash to meet all your needs in cases of unemployment, illness and accident.
Make it easily accessible
The funds you create have to be easily accessible for an emergency at any moment. You can keep the amount of funds in your bank account even in daily interest products. For example, you may prefer products that you can convert into cash whenever you need, rather than products that require long and even medium term waiting, but you must make sure that they are accessible.
Do not use for unnecessary expenses
Your emergency fund must be able to be cashed and accessible at any time according to its purpose, but it must also be used according to its purpose. For example, do not use your savings unless it really requires an urgent need. You can open a new bank account, which is advantageous and free of account operating costs, so you can keep your money close in case of emergency and in case of unnecessary spending.
Life; illnesses, accidents and unemployment. Always consider creating emergency funds to take precautionary measures and improve your financial security.