What is the best way to build emergency fund. Share strategy please
Hi Naveen, I believe the two main things you need to build an emergency fund are consistency and discipline.
Building an emergency fund is not about putting away a big sum overnight. You need to take small, steady steps that add up over time. Think of it as creating a safety net.
This is how I built mine and you can do the same:
- Have a Clear Goal: Start by deciding how much you need. Aim for at least 3 - 6 months of living expenses. For instance, if your monthly costs are ₹40,000, your target should be ₹1.2 to ₹2.4 lakh.
- Open a Separate Account: Keep your emergency fund in a dedicated account. This keeps it safe and helps you avoid accidentally spending it on non-essentials.
- Automate Your Savings: Set up an automatic transfer every month. Treat it like a must-pay bill. Small and regular amounts add up faster than you think.
- Monitor and Regulate: Review your fund once in a while. If your income or expenses change, tweak your monthly contribution accordingly.
- Replenish the Account: Dip into it only for real emergencies and not for planned shopping, trips or gadgets. If you ever use it, make it a priority to replenish it quickly.
Remember, this safety net will support you and your family in times of need. So, ensure it is at the top of your priority list.