ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -It is generally recommended that the size of an Emergency Fund is substantial enough to cover monthly expenses for a period of 6 to 9 months. As your monthly expenses are Rs. 70, 000, your Emergency Fund needs to be between Rs. 4.2 lakh and Rs.

Detailed explanation-2: -Most experts believe you should have enough money in your emergency fund to cover at least 3 to 6 months’ worth of living expenses. Start by estimating your costs for critical expenses, such as: Housing. Food.

Detailed explanation-3: -The rule of thumb is that individuals should have enough in an emergency fund to cover three to six months of living expenses. Add up essential living expenses for one month and multiply that amount by either three or six (this will depend on how much you’re most comfortable having in case of emergency).

Detailed explanation-4: -An emergency fund is designed to protect you from common worst-case financial scenarios, such as a job loss. For many, three to six months’ worth of expenses provides ample time to find another job, even if it’s just a temporary holdover or part-time gig while continuing to look for work.

Detailed explanation-5: -Emergency savings should be placed in an account that is easily accessible, so you do not incur early-withdrawal penalties as you would with an account such as a certificate of deposit (CD) or Individual Retirement Account (IRA).