Prepare to face emergencies with Emergency Fund – MoneyMindz

By | 21/09/2018

You are going about your daily routine happily. You are young and healthy so you don’t really have to worry. Then suddenly you find yourself standing face to face with an emergency such as loss of employment, injury or illness, damages in your house or car that demand attention, etc. India’s First Free Online Financial Advisory Moneymindz brings to your knowledge that in such a scenario having an Emergency Fund will be beneficial for you otherwise you may have to borrow from your other savings and investments, family, friends or even third parties.

What is an Emergency Fund?

An emergency fund is an account for capital set aside so as to face events that are financial emergencies like job loss, illnesses, injuries, etc. This fund, India’s First Free On call Financial Advisory Moneymindz says, improves financial well being and gives financial security.

Emergency Fund is popularly known as Contingency Fund and informally known as Rainy Day Fund. It is created with the intention to provide a cushion of liquidity for hard times and financial hardships.

Features of Emergency Fund

  1. Access at the hour of crisis

The basic idea of Emergency Fund is to provide you financial comfort at the time of financial emergency. So that you don’t have to borrow elsewhere.

  1. Withdraw the money at need it without delay

Emergency Funds are for handling emergencies. Therefore, it should be easier for you to withdraw money when you truly need it.

  1. Must offer guaranteed returns

The Emergency Fund is meant to support you during a financial crunch so during financial crisis, the entire corpus must be available for you to use.

  1. 6 to 12 months of your regular income
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An ideal Emergency Fund contains six to twelve months of an individual’s regular income, experts recommend.

Merits of Emergency Fund

  1. Liquidity

Your assets can be converted to usable cash.  For emergencies, you require liquidity and urgent cash.

  1. Accessibility

Your Emergency Fund can be (and ought to be!) accessed immediately.

  1. Safe from loss

Your Emergency Funds should not be invested in risky assets. You must invest them in safer assets like a savings bank account.

  1. No need to depend on cards

Since Emergency Fund provides you instant cash when you need it, you don’t need to use cards, especially credit cards.

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