Best Emergency Mutual Fund

Sudhendra Lakshmana Rao 30 Aug 2021


As the name implies, a best emergency mutual fund is a reserve set up to cover unexpected expenses that would otherwise put a strain on your monthly cash flow. An emergency fund is a valuable asset that should be set up in case of a financial emergency.

The purpose of an emergency fund is to assist you in dealing with the unexpected. A normal emergency fund is 3-6 months' worth of living expenses. This equates to around four months' worth of pay.

It is a reserve that you can use in a time of crisis or for unanticipated and unplanned events, rather than for regular expenses. As a result, you must tailor it to address any unexpected financial gaps that may arise.

How to Put Money into a Best Emergency Mutual Fund

An emergency fund is not developed overnight, but rather over time. Set away a specific amount in a different bank account every month. It will quickly grow into a sizable corpus that you desire.

Assume you've decided to set aside Rs.1 lakh as an emergency fund. In this situation, you can set away Rs.5,000 or Rs.10,000 per month to build up the required capital.

Why should you keep an emergency Mutual fund?

Financial stress can be caused by a loss of income owing to unexpected unemployment, health-related concerns that your medical insurance won't cover, and so on.

Having an emergency fund on hand can help in these situations.

Here are some real-life scenarios in which I would require an emergency fund.

  • Regardless of how well you plan, the following catastrophes can occur at any time and necessitate considerable liquid assets (an emergency fund) to meet your financial obligations:
  • Global/national emergency : The COVID-19 virus's unanticipated spread is a great example of how an emergency can knock on your door when you least expect it.
  • Unexpected unemployment: Even if you work in a secure private job, you cannot rule out the potential of a layoff. It will be difficult to manage EMIs, insurance premiums, and other ordinary lifestyle expenses when dealing with such a situation.

What should the contents of an best emergency mutual fund be?

  • Liquid -An emergency fund should be accessible in a day or two at the most, as you may require the funds right away
  • Not volatile -The need for emergency money might arise at any time, and volatility is the last thing you want in this situation.
  • Fixed - The amount you set aside for an emergency fund should cover 3-6 months' worth of spending

Why An Emergency Liquid Fund is important

The ability to pay unforeseen expenses is the primary purpose for having a liquid emergency fund, and it is the most important feature to consider when deciding where to keep your emergency money. You should be able to withdraw funds whenever you need them and without delay.

At the same time, you must avoid being penalized in the form of an exit load or pre-waiver. Simultaneously, you must avoid being penalized in the form of an exit load or a pre-withdrawal penalty. The value of the investment should not depreciate and should provide exceptional returns.

To further grasp it, let's look at what an emergency fund isn't.

  • The emergency fund should not be utilized to attain financial goals such as buying a dream home, automobile, or trip.
  • It should not be regarded as a massive corpus that must be built over time. It should be built over several months and then left unchanged unless it is required.
  • As your expenses rise, make sure to keep contributing to your emergency fund.
  • Furthermore, an emergency fund is not a set amount for everyone. It varies depending on the individual's income and lifestyle requirements.

Best Emergency Fund Hack

#1 Use Credit Card

Your credit card can be a smart short-term emergency fund choice because it gives you immediate cash while giving you a month or more to pay off your debts. As a result, it makes sense to pay your credit card bills on time and keep your credit limit open.

#2 Get a health insurance

Having health insurance provides a virtual boost to your emergency reserve. If your emergency is medical, health insurance can cover major medical costs and save you a lot of money.

Are you curious to know more of this? Connect with us to get the Best Emergency Mutual Fund from Innvest!

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