How long will our emergency fund last?Every working person maintains an emergency fund. This emergency fund is required to meet unforeseen expenditures under emergency conditions. A person or his family-members can meet with a sudden accident. A person may have to visit his/her home town due to sudden requirements. He/She may have to attend a lavish marriage of a near relative. Each of these cases requires a big amount.
Investment experts advise us to build an emergency fund to meet these expenses. They strongly advise us against withdrawal from Provident Fund for the aforestated purposes. Generally the experts tell us to keep money aside in a liquid mutual fund for gradually building up of an emergency fund.
As a thumb rule, every working person should keep his/her 6-8 months' salary in the emergency fund. If we are able build up an emergency fund with 6-8 months' salary, we can meet unforeseen expenses from this fund. This will help us to achieve financial freedom in future.
But, do we do this? Do we keep 6-8 months' salary in our emergency fund?