Emergency fund: Here's why you should build one without any delay

The second wave of Covid-19 is once again threatening to destabilise our financial plans. Gleaning from last year’s experience, we should be better prepared to tackle unforeseen circumstances like salary cuts.

Last year, the majority of us learned the importance of having an emergency corpus the hard way.

It is imperative to build an emergency fund without further delays as this is the only way we can shield ourselves from any financial mishap arising due to circumstances beyond our control.

We have lived through the most stringent lockdown, which paved the way for job losses and cuts in pay packages. This had a back-breaking impact on all the scheduled expenses. EMIs had to be deferred, school fees were skipped and even the groceries had to be taken on credit. And on top of that, those hit by coronavirus had to dip into their retirement savings to fight the virus. To deal with the crisis, the government allowed employees to withdraw from EPFO.

This situation arose as many people did not have an emergency fund. Those who withdrew money from EPFO were mostly employed. But what about those who had no jobs?

It is difficult to think about bad times. We always think of good times but it is always better to prepare for bad times. It is advisable to keep aside six months’ expenditure as an emergency fund and simply forget about it.

Once bitten, twice shy should be the mantra in this case.