What makes emergency fund a necessity in today’s life?

by Chirag on March 7, 2012

in Educational

Okay, I know that you know it. But still, like a constant reminder from a wife to her husband of the soon to finish resource (for that matter, say cooking oil), I need to bring you closer to realism. You do not need another Gulf War, or the much hated US recession period, to realize the significance of having some resource (read money) set aside for the bad days. All of us are sensible enough, and realize how it matters (or does not matter) to have something to rely upon when all the resources seem to end. True that it is, I realized the importance of money when I started earning it. But I do not intend to realize the importance of having an emergency fund when I have no other option left with me!

I belong to the risk-averse group of people who make hay when the sun shines. Waiting for the rain can be too taxing for me; I do not want to emerge an inspiration from crisis (if only I emerge successfully!). Being a practical person who leads a normal life (happy when the index rises, and apprehensive of a fall), I believe in keeping certain part of my hard earned money in the emergency fund. Knowing very well that emergency fund does not emerge magically, I have to work like ants to keep piling the stock for the bad days (hoping they never come).

Since I like investing (not hoarding), creating an emergency fund initially seemed like losing profit (which may come as interest or otherwise). Not really! Besides maintaining liquidity, an emergency fund acts as a reserve (or your last resort) when you seem to have given up all. And if you are too apprehensive of creating one yourself, ask your better half to assist you in resisting the temptation to spend all.

An emergency fund can cater to the basic needs, when other resources seem inaccessible. It is not supposed to include your list of luxuries, otherwise your emergency fund would emerge overwhelming. Experts are of the opinion that one should have between three to six months of living expenses reserved under emergency fund. Aim high so that you at least have something (remember how often you have been told to try for the 1st position when in school; the point is, when you aim at 1st position, you may land up getting 2nd or 3rd!).

Starting early is good. If you’re a bad saver, begin with small amounts (howsoever trifling). Once you have the habit of putting something in the piggy bank, you will relish the idea of saving (and that you are actually doing it). Repeated attempts remind about the importance of a task.

Besides all the economics (which can be elaborate), an emergency fund also serves a boost to your morale. Meeting obligations which can keep your household jobs uninterrupted (like food, electricity bill, health care service, utilities, etc.). You need not be a bankrupt, because at that time, even your most worthy accomplice may show his/her back. Furthermore, the emergency fund serves your trustworthy companion which provides a strong foundation for the recovery of your financial health.


Since you cannot change your vulnerability to the world, make yourself predictable. When it comes to money, earning more is not important (since there is no end). Managing whatever you earn, to yield favorably, is important.

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