Financial planners suggest that one must allocate six months’ worth of expenses towards creating an emergency fund. However, this can vary according to the different financial situations of different people. Nonetheless, it is crucial for everyone to maintain an emergency fund to tide over critical times.
Life can surprise you with unpleasant incidents and accidents. From unforeseen medical emergency to losing your job, there may be a number of that may have significant financial repercussions on you and your family. Thus, it is always wise to have a back-up plan, especially with respect to your finances.
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Financial planners suggest that one must allocate six months’ worth of expenses towards creating an emergency fund. However, this can vary according to the different financial situations of different people. Nonetheless, it is crucial for everyone to maintain an emergency fund to tide over critical times.
Importance of having an emergency fund
An emergency corpus is the money that you set aside for emergencies, apart from savings. You can rely on this money to support you during a crisis and help you get by without borrowing money from banks, friends or relatives. Moreover, having some emergency cash will give you immense peace of mind and put you in a better position to deal with the crisis.
How a savings account can help you during emergencies
Once you have decided the amount you want to set aside for an emergency, the next step is to consider where you want to store that cash for safekeeping. It is not entirely safe to keep emergency cash in your home, as it can be destroyed or damaged in the case of natural calamities, fire, can be stolen during a robbery. A savings account is the best place to park your emergency funds.
There are a few reasons why an account meant for savings can be the most appropriate place for saving your emergency funds. These will be discussed below.
Easy access to cash
One of the best savings account features that make it the perfect tool for parking your emergency funds is the free-flowing access to cash. In this account, you do not compromise your ease of access to emergency funds and keep them safe, as the bank takes utmost care to safeguard your funds. This is the safest and most liquid option where you can conveniently save and access an emergency corpus.
Balance between saving money and earning interest
A significant advantage of saving your emergency funds is that you can earn interest over them. This way, you are getting dual benefits from keeping your emergency-need money in a safe place and growing these funds by making some interest.
Zero minimum balance requirements
Many accounts meant for savings have a zero minimum balance requirement. This can be significantly beneficial to you in times of crisis. Suppose you are facing an unexpected cash crunch and want to withdraw money from your account. In a zero minimum balance account, you can remove as much as you want without worrying about defaulting on the minimum requirement and having to pay the penalty.
High-yielding savings account
A high interest savings account allows you to receive a higher interest rate than a standard account meant for saving. Thus, you can withdraw money without worrying about expenditures as the interest rate is higher than other accounts.
An account for savings serves the twofold purpose of saving emergency funds while earning interest over them. You can also make an emergency payment straight from your phone by utilising the UPI payment option. Today, everyone wants to become financially independent at a young age, and saving an emergency fund is the best way to ensure complete financial freedom.
