Video Editor: Mohd Ibrahim
What if you have money in your bank account but the ATMs remain closed for a few days due to flooding from excessive rainfall? In such a situation, how will you buy basic necessities such as milk and vegetables?
Or let’s assume that even though you have health insurance, you have to pay for the bills yourself before your company reimburses you? How will you do that?
In episode 11 of Dhan Ki Baat, personal finance guru Gaurav Mashruwala talks about the necessity of emergency funds, so that you can be prepared for any unforeseen emergency – be it a medical one or even a natural disaster.
Ideally, a contingency fund should have three months worth of expenditure of which it is advisable to keep aside hard cash at home for a week’s worth of expenses.
Two Sets of Personal Contingency Funds
You can just go to your bank and say that I want to keep aside a certain amount in fixed deposit but in such a way that I can take that money into my savings account as and when needed.
This way you’d be keeping the emergency fund at two places – at your home as hard cash, and in your savings account, which can be linked to a fixed deposit.
If you want to keep aside a large amount of money as your emergency fund, you can put it into mutual fund schemes like cash fund, liquid fund etc.
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