People across the globe are worried about the recession looming large, with many predicting that countries will enter into recession soon or later
The key to shielding yourself from such unforeseen circumstances is having an emergency fund. Financial experts are suggesting individuals to build an emergency fund immediately ahead of a likely recession
What is an emergency fund? As the name suggests, it is the money used to cover expenses during unexpected emergencies
In simple words, this emergency corpus is meant to be used only in times of crisis like unexpected job loss or paying a medical bill
It is different from the money you save for buying a car or paying a college fee
At the same time, it is not the money that you invest in the share market or other immovable properties that are either volatile or harder to access. Also, the emergency fund shall be quickly and easily accessible
How much should one save? The basic criterion is to aim for a minimum savings of at least three to six months of your salary
Different factors like expenditure, EMIs, and family needs, among other components must be taken into consideration before deciding on how much to save
Consider opening separate savings account for building the emergency corpus. Also, consider interest rates offered by banks to give a boost to the money parked in the savings account in the form of compounding interest
Initially, it may be a difficult task to contribute money towards emergency funds, especially after spending money on daily expenses and saving for other requirements
But the idea is to start contributing in small amounts every month to build a sufficient corpus in the long run