How Much Do You Keep For An Emergency Fund?
When you realize how important it is to have an emergency fund, you start saving money so that you have funds to face any emergency situation. So how much should you keep for an emergency fund? Maybe you see other people and decide how much you should save to create your emergency fund.
You don't need to look at other people and what they are doing. You should pay attention to yourself, your income, expenses, investment, and financial situation. Find out how much money you usually spend every month.
The general rule of thumb is, you should have three to six months' worth of living expenses as an emergency fund. If you expect that something might happen and you may need money instantly, you can increase your emergency fund. But if you hold too much money for that, you may lose your potential gain.
The money you hold in your emergency fund just sits there and doesn't earn more money for you. You can keep money in the bank and get low interest. But you are losing purchasing power consistently. So it is better not to hold too much money as an emergency fund.
On the other hand, if you think you want to earn more and invest your emergency fund in the stock market, you cannot get it instantly when you need it or, you can lose money if the price of the stock falls. Maybe you only think about how much you would gain, you don't consider how much you lose.
The emergency fund will not serve its purpose and protect you in hard times when you have to deal with emergency situations if you don't get your fund instantly. So don't put your emergency fund in an investment and be in a vulnerable situation.
You have an emergency fund and you spend money to get rid of an emergency situation. Now the most important thing is to save money and maintain the same balance. Sometimes life surprises us. Most of the time, when you are dealing with a challenging situation, you see different problems appear one by one. You feel like everything hits you at once.
Maintaining the emergency fund is very important. And it is you who has to decide how much money you need for an emergency fund. What I'm sharing here is my opinions, not financial advice. Do what you think is best for your personal finances.
So what do you think? Please feel free to leave your comments. Thank you for reading this post. That's it for now. I'll be back with another post.
When I started blogging, the funds that I always save up is the emergency fund. For me, that's the most important thing since we do not know what will happen in the next coming days.