Not only savings must be prepared, but an emergency fund is equally important. What is an emergency fund? An emergency fund is money that is collected and only used when you have a need. There are often cases where a person does not have any money left to cover sudden pressing expenses. An emergency fund can be a protection against this risk.
In order to live a calmer life, follow the 5 advantages of preparing the following emergency funds.
No Debt Needed
In life, there are many unexpected expenses that can occur. Examples are usually broken household appliances, family members who fall ill, or children’s school fees. However, some people can also be in debt because of an inability to manage finances. Preparing an emergency fund will prevent you from borrowing money from friends, family, or even moneylenders.
One of the advantages of an emergency fund is protection against crises that may occur. Starting from the economic crisis, the threat of layoffs, disasters, to the huge increase in hospital fees. Setting up an emergency fund is important to try so that you are ready to pay pressing bills.
Especially when there is an economic crisis or a world crisis that has an unfavorable effect on your source of income. An emergency fund can be used to support life and family for several months to years until finally you can return to work with a reasonable income. This is also a guarantee of life that is always safe in all circumstances.
Maintained Comfortable Finance
Regarding the previous 2 points, you and your family’s financial condition is guaranteed to be healthy with the existence of an emergency fund. Don’t get me wrong, emergency funds are different from savings. Preparing savings is useful when you want to buy something, such as a house, car, or vacation abroad.
An emergency fund also ensures that the savings you have prepared so far are always comfortable. That is, when things happen that you don’t want, you don’t need to take money from the savings. Not bad using the emergency fund that has been placed. That way, expenses can always be borne and dreams can still be achieved.
Investment is currently increasingly popular because of its nature that can be used as passive income. Setting aside a small part of your income for an emergency fund is also useful for those of you who want to be involved in the investment world. The reason is, there is always a risk of loss in every type of investment that is attempted, given the principle of risk and return.
An emergency fund is useful when you want to set aside money for investments. Even if there are sudden expenses that must be paid immediately, you can still make investments as usual without worrying about money for daily needs, let alone savings.
More Productive Work
Are you the type of person who works to live or live to work? Whatever the answer, it has been determined that the majority of people are stressed at work because they only focus on dependents and monthly expenses. Not to mention the necessities of life which continue to be day by day and continue to be expensive, it can just exceed the amount of income each month.
Therefore, having an emergency fund has a good effect on your efficiency and productivity at work. No need to be afraid of sudden expenses, the emergency funds that have been collected can be used to pay for these costs. You can also work more safely without the burden on your mind.
Guide to Raising Emergency Funds
After seeing the many advantages of having an emergency fund, it’s time for you to practice smart tips so you can prepare an emergency fund. The first thing to try is to control your finances. Start by cutting costs and setting aside at least 10% of your income as an emergency fund.