ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Reason An emergency fund account needs to have a high degree of safety and liquidity. High safety means that there is very little chance of losing the principal (dollar amount in the account). High liquidity means it is easy to get cash out of the account quickly.

Detailed explanation-2: -An important consideration when saving money for emergencies is: High degree of safety and liquidity. Discretionary income is: The difference between your total income and your essential living expenses.

Detailed explanation-3: -Money markets are great for your emergency fund due to their liquidity and stability. A mutual fund portfolio that is properly diversified will have all investment dollars located in just one of four different classes of financial assets. Single stocks and mutual funds carry the same amount of risk.

Detailed explanation-4: -Some common examples include car repairs, home repairs, medical bills, or a loss of income. In general, emergency savings can be used for large or small unplanned bills or payments that are not part of your routine monthly expenses and spending.

Detailed explanation-5: -a. If an individual were to have an emergency, cash needs to be easily accessible. Savings accounts are more liquid than investments because a person can easily get money out of a savings account in a few minutes, while it is harder to get money out of an investment because they are not easily accessible.