You might been told to save certain amount of money or exclusive fund for unexpected moments especially when you are reading finance articles or listening to lectures or advices on finance management. It’s called emergency fund.
An emergency fund is the amount of money which had been prepared for unexpected moments where at that time you need money. Some unexpected moments such as losing your job, medical emergencies, vehicle repairs or death will make you stuck in difficult situation – and that’s when you need the money. And you are a fortunate person if you are ready by preparing the emergency fund earlier. Emergency fund is a life saver and you will understand much better when you face the situation yourself.
Having both regular savings account as well as emergency fund is a nice step where you can separate these accounts for different functions.
Saving an emergency fund will help a lot to avoid any debts and this is a recommended step after bankruptcy. However an emergency fund is not rigid as you can plan your emergency fund into different parts and periods. You can set the minimum and maximum of the fund and set the length of the fund usage. Emergency fund should be completely being separated fromyour regular savings account and these fund should not be accessed unless absolutely necessary.
Some people might get complicated feeling when talking about emergency fund however getting prepare is a lot better than feeling regret in the future. The first step is to open a savings account that you will be the place for your emergency fund. Each bank offers different interest rates and provides different benefits and features so it is recommended to get enough information and comparison before opening an account.
Having an emergency fund will help you in becoming financially secure and will avoid you from facing the debts due to unexpected moments. An emergency fund is indeed the recommended first step for staying out of debt.