ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -An emergency fund is a cash reserve that’s specifically set aside for unplanned expenses or financial emergencies. Some common examples include car repairs, home repairs, medical bills, or a loss of income.

Detailed explanation-2: -How much should you save? While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months’ worth of expenses.

Detailed explanation-3: -Why do I need an emergency fund? Emergency funds create a financial buffer that can keep you afloat in a time of need without having to rely on credit cards or high-interest loans. It can be especially important to have an emergency fund if you have debt, because it can help you avoid borrowing more.

Detailed explanation-4: -An emergency fund is a financial safety net for future mishaps and/or unexpected expenses.