There are two recent events that created a Financial Emergency situation for various families.

First one is closing of Jet Airways and this event brought many people on road because people have lost the jobs and there is no monthly salary for the employees.

Second is natural disaster in the form of cyclone fani , many people were impacted and it might take couple of months before life comes on track.

Now the question is , are we ready for such financial emergencies when there is loss of job or you are unable to work or you are impacted by some natural disaster or if you have to be away from work because of some medical issues.

So what could be the readiness for such situations??

And that's where we suggest to maintain Emergency Fund as part of your Financial wellness.

An emergency fund is expected to cover a financial shortfall when an emergency situation occurs. Your emergency fund should be able to serve for your monthly expenses in case of emergencies. An emergency fund should easily be accessible and should be hold in liquid investments. For example: Any real estate property can not be considered as Emergency fund but amount in saving bank is considered as emergency fund.

So what should be the amount of Emergency Fund ?

Depending on your earning and expenses, an emergency fund can be of 9-10 months of your monthly expenses. For example, if your monthly expenses are 50000 Rs then maintain 4 to 5 Lakhs Rs as emergency fund.

Obviously we expect emergency fund to be utilized rarely so it should not lie idle in saving bank account but should be invested in some liquid investments. You can try following formula on how to keep Emergency Fund although choice is yours.

Keep 25% in Saving Bank.

Keep 25% in Fixed Deposits.

Keep 25% in Liquid Funds.

Keep 25% in Equity Saving Funds.

You can try to build Emergency Fund slowly. Save a particular amount every month in a different bank account. Soon it will grow into a suitable emergency fund that you wish to keep.