If you don’t maintain an emergency fund, you are living on an edge. When emergencies arise, getting a money within the shortest time possible will be very difficult.

We know this proverb ‘hope for the best, but prepare for the worst’. In the context of personal finance, it’s an emergency fund.

But my mom believes that preparing for worst is like inviting it and asking the universe to make it happen. I know it’s a nonsense.

Who will want something bad to happen on oneself? Who wears a helmet for wanting to get his head smashed?

Similarly, who would maintain an emergency fund wanting to be a victim of financial emergencies?

It is to fight financial risk caused by emergency situations and then avoid becoming financially vulnerable in life.

Why You Need an Emergency Fund?

One thing an emergency fund gives is mental peace for me. I do not have to see rolling eyes of my relatives and friends.

How uncomfortable is it to ask money from someone? You would end up even having to swallow your pride.

During emergencies, money should be the last in your mind. Otherwise, it will not only cost time and money, your sanity too will be disturbed.

When you go for borrowings within short period, you might end up paying more like interest on money you borrowed from a loan shark.

How Much for an Emergency Fund?

How much should be your emergency fund? There is no rule. It depends on yourself – mindset and situations.

Some people based their emergency funds on monthly income whereas some do on monthly household expense.

Personally, I base it on household expense and keep 8 months’ expense equivalent as such fund.

My friend who keeps 4 months’ expenses as his emergency fund thinks that it’s too much.

It is the thing. Such thing depends on individuals. It should be where you don’t feel guilty of losing better returns and feeling unsafe of emergencies.

Where to Keep an Emergency Fund?

Your emergency fund must be easily accessible when you need the most but also earning decent returns.

Taking that into account, I keep my emergency fund in a savings account with BDBL. BDBL gives the highest interest on savings account.

Few years back, convenience and banking service accessibilities must be considered. Now it’s no bank’s monopoly.

It should be used only during emergencies not on assumed emergencies treating your emergency fund like a current account.

In the end, the money you saved over the time have different value when you use it at the time you needed the most.

Do you maintain an emergency fund? How much and where do you keep your fund?  

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