The importance of emergency fund

Baxi Investment NJ Partner


An emergency fund is a pool of liquid money set aside for unforeseen expenses like a medical expense or job loss. Having an emergency fund can be the difference between a small bump in your financial life and complete disaster in your entire life.

Many people fail to prepare for the future. Financial security is important for every person. An emergency savings fund can help individuals look forward to the future without worrying about being unprepared for unexpected expenses.

Having an emergency savings fund is critical to the financial security of your family. Learning more about this type of fund can better prepare people to start saving if they have not already done so.

Everyone has a certain set of fixed expenses each month. These bills have to be paid on time to retain excellent credit. Some of these expenses include a mortgage, health insurance, life insurance, car payments, car insurances, home utility bills, food, and automobile gas. Let’s say that a person is living week to week and has no savings at all or has only a very minimal amount in a bank account. If this person suffers a job loss, this could be catastrophic.

That’s why no matter how hard it is to save; an emergency fund must be saved in order to carry a person or family through those tough economic times when not enough income is coming in to pay all the required expenses. People can lose their homes to foreclosure. Renters can be evicted and have no money to stay at a hotel or to re-rent another home. Shelter is a must, as is food, and paying for prescription drugs, and keeping up all of the insurance policies and car payments, otherwise people can have their cars repossessed if they do not make the payments.

So it’s imperative to save a separate emergency fund. One way to do this is to cut back on nonessential items such as eating out every day or buying fancy clothing that people don’t really need. Keep a journal of the items you cut out, and put that money into a savings account each week. As the account starts to grow, you’ll probably start to feel a real sense of accomplishment, and you probably won’t even notice the things that you cut out of your spending.

Paying down debt is also a great way to help grow your savings. As you pay off your loans and credit cards, the money you used to put toward these bills can be set aside in savings where it will grow for you year after year.


How much money to set aside as emergency fund?

Ideally it must be an amount equal to 6 months income.


How to invest emergency fund money?

Always remember that emergency fund has an intention of being useful at any point of time so liquidity is of prime importance. Second comes safety as we cannot afford to lose anything from this fund. Third is it must provide average returns. Liquid funds are the best option. With NJ E-Wealth account one gets this facility without additional cost. The service is available at just a click of mouse or a tap on your mobile screen. One can get returns on daily basis, so if you have money even for 24 hours, you can invest it. Average returns are 6.5% per annum.


To know more about planning and investing your emergency fund contact us today on +91-7990290560

Hardik Baxi,

Baxi Investment.