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We never know what the next moment holds for us.There is no better way to prepare for such unexpected events than to create an emergency fund.
Life is unpredictable and so are the expenses that come with it! Which is why an emergency fund is important to stash away a corpus fund that can shield you against all unexpected expenditures that come your way.
Now, assuming you have just started earning or have been earning for a few years, it’s important to get started with saving a chunk of money from your monthly takeaway that can cushion you from any financial distress.
And, if you’re someone who hasn’t started putting in money for this aspect, then it’s important for you to know why you should start putting your funds to create one.
Why Do You Need an Emergency Fund?
There's no silver lining to having an emergency fund than to meet emergencies that aren't up for prediction.
However, with the practice becoming popular, individuals and even financial advisors have come up with more than singular emergencies to have such a fixed corpus.
Take a look at these 8 prime reasons that justify having emergency fund padding.
1. You Need to Pay Off Debts
When you are in debt, there's no escape from stress and extra financial burden to pay it off.
Especially if you are someone who needs to borrow during every financial bump, having an emergency fund to meet your debt emergencies becomes the need of the hour.
Such an extra corpus can help you meet the requirements you didn't budget for or can also help you pay off your existing debts and loans.
2. You Don't Have Job Security
Considering how most of us have come to embrace the laptop-lifestyle, there's no doubt in seeing a rise among individuals who have become self-employed.
Being a self-employed individual gives you freedom to work at your pace but deprives you of unemployment benefits and puts you in the driver's seat of your finances.
The circumstances can be anything from the business going slow to losing a client or changing your business approach.
With such uncertainty, having at least a year's emergency fund is a must.
3. You Just Started Budgeting
If you are someone who has recently started budgeting, chances are - you have just recently become familiar with the term "emergency fund."
As a beginner, you may end up missing out on a couple of points while preparing your first or second budget.
However, an emergency fund like this can fill for these budgeting errors and help you sustain better throughout the month.
4. You Only Have a Single Income Source
Having a single income source is equal to having no income source because of the uncertainty it brings.
If you rely only on one job, it becomes very important to build an extra cushion to fall back on in case you lose your job.
While single individuals can suffice in a year-long emergency fund, the safety net should be bigger if you look forward to starting your own family.
5. You Don't Live With Your Family
Not living with your family has its cons, too - imagine not being able to afford an emergency flight ticket due to a price surge or not having an immediate travel budget. Sounds disturbing, right?
This is when extra emergency funds can come to your rescue in such scenarios.
6. You Have a Saving Goal in Mind
We all make goals then and now and often get diverted - the challenge, however, is to stay consistent.
If you are working towards a plan right now, like getting your dream home or getting your car - building an emergency fund will let you move ahead smoothly without taking a dip into the savings.
If you keep an emergency fund ready, your savings won't be affected while pursuing your dream.
7. Stay Prepared For Your Health Emergencies
You may be fit and fine today but remember, you are only getting older, and there's nothing like staying ready to meet your health emergencies then and now.
We suggest building an emergency fund to see your doctor urgently or buying some extra medicines.
Especially if you already have some medical emergencies, creating such an emergency fund becomes much more essential.
8. You Have Got Liabilities to Maintain
Suppose you own liabilities like a home or a vehicle that calls for financial expenses then and now, keeping some money aside for its maintenance and repair is essential. You never know when you have to get a gas pipe or a ceiling fixed, and dipping into your savings is not a great idea.
To Wrap Up
No matter where you are in your financial journey, having an emergency fund is of utmost importance. But if you are just a beginner, all of these might seem intimidating. The solution here is to gradually develop a habit of building an emergency fund every day.
An application like Jar can be of great help where you can start building your fund from as small as Rs. 10. Onboarding on the Jar app is simple and hassle-free. So, get started with using the Jar app, start saving daily and see your money reach a bountiful in no time!