The Importance Of An Emergency Fund

Prabin Agarwal Founder & CEO, Prabin Agarwal - Empowering Investments

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One of the important money lessons that this pandemic has taught us is the importance of having an emergency fund. Very often, investors have plans for their children’s education and their own retirement but ignore creating an emergency fund to tackle the uncalled-for situations in life. The pandemic brought to light various emergency situations such as lay-offs, pay cuts, and growing medical expenses that one could possibly face but never accounted for during financial planning.

What is an Emergency Fund?: An emergency fund is essentially a kitty set aside solely to cover any unexpected event(s) in life. These emergencies can include situations such as delay in salary, a temporary pay-cut, an accident leading to disability due to which a person cannot work temporarily, sudden loss of job, hospitalization of self or a family member, home repairs due to a natural disaster, unanticipated vehicle repairs or any other situation in which you need more money than usual. The idea behind creating an emergency fund is to help address time-critical requirements in life. So, a trip to the Maldives does not count.