Everything You Need To Know About Emergency Funds and Cash Reserves 

One of the few personal finance concepts that garners near-universal praise is the emergency fund.

What is an emergency fund?

An emergency fund, also called a “rainy day fund” or “cash reserves,” is money that you have access to in case of an unplanned sudden need.

Here are the 3 main reasons you need an emergency fund

Life can be expensive at times.  Events like a car repair, small medical bill, or broken cell phone are likely to happen occasionally

Avoid unnecessary debt

If you don’t have cash available to pay for an expense like this, or if you suffer a job loss, the alternatives don’t offer a positive outlook.

Help manage volatility

Even if you have some investments, there’s volatility that cannot be predicted with certainty.

Safeguard against a job change

Even if you’re choosing to change jobs on your own volition, it’s best to be prepared for the transition.

How much do you need to set aside in your emergency fund?

Well It depends! Your emergency fund should be a reflection of your lifestyle’s ability to tolerate and respond to risk.

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