It is true that investing can help you achieve financial freedom. But, it doesn’t end there. You should understand that when investing money, there are things to consider, and that is building emergency funds. Our topic for today as our third part how to invest money series of topics will be “emergency funds”.
So, what is an emergency funds? From the word itself, emergency funds is a source of funds exclusively for emergency cases. Examples of emergencies are roofing repair during rainy days, car maintenance, sickness, accidents, sudden illness, etc.
Emergency funds, health insurance and life insurance should be prepare before investing your hard earned money. But, we have to focus on emergency funds today. Topics for health and life insurance will be publish later on.
Tips in Building Emergency Funds
1. Determine How Much Emergency Funds Should You Need
It is advisable to have emergency funds with a an amount of money equivalent to your 6 months income. Example, if you have $2,500 per month income, your emergency funds should worth $15,000.
2. Emergency Funds Should Easily Get 24/7
Since we don’t know what will happen in today, tonight or even tomorrow, emergency funds should easily withdraw immediately in case of emergencies. You can deposit your emergency funds in the bank.
3. Build Emergency Funds Easily
Every time you receive your monthly salary, it is ideal to set aside at least 10% of your money and put it in your emergency funds. Once you complete the suggested amount (6 months equivalent of monthly income), stop depositing money in the bank.
You don’t want to pull out your investment funds during emergency cases especially if the funds are in losses due to down market, right? That’s why, emergency funds is very important. Besides, redeeming your investment funds will take too much time, but, if you have emergency funds, anytime and anywhere you can get it as long as you need the funds.
Other Useful Tips:
While building your emergency funds, buy health and life insurance. In our next how to invest money series of topics, insurance will be discuss further.
Thank you for spending your time reading this guide about investment options for emergency fund. If you have any questions, please write it in the comment box below. May you have achieve financial freedom, keep investing for your future.