ECONOMICS (CBSE/UGC NET)

ECONOMICS

SAVING AND INVESTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Why should interest earned not be a factor with your emergency fund
A
Inflation can eat up the interest earned
B
Interest-bearing accounts at banks earn a high rate of interest, therefore, interest is not a concern
C
The emergency fund is not intended to grow wealth
D
None of the above
Explanation: 

Detailed explanation-1: -Why should interest earned NOT be a factor with your emergency fund? Inflation can eat up the interest earned. Interest-bearing accounts at banks earn a high rate of interest, therefore, interest is not a concern. The emergency fund is not intended to grow wealth.

Detailed explanation-2: -This is due to both the opportunity to earn interest on the money and because inflation will drive prices up, thereby changing the ʺvalueʺ of the money. Why should interest earned NOT be a factor with your emergency fund? a) Inflation can eat up the interest earned.

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 separate savings or bank account used to cover or offset the expense of an unforeseen situation. It shouldn’t be considered a nest egg or calculated as part of a long-term savings plan for college tuition, a new car, or a vacation.

There is 1 question to complete.