What is Emergency Corpus? Why do we need to have an Emergency Corpus?
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Emergency fund/ corpus as the name suggests is a portion of our income that we have to set aside in order to meet certain unforeseen or unexpected expenses. It is very important to have this fund in a liquid form (meaning it can be converted to cash instantly) to meet the purpose for which it has been set aside.
Emergency here could mean an unexpected medical treatment, managing a career break, major household expenses, unexpected travel, sudden automobile expenses etc. While some of this could be managed by having insurance for the same, but it is wise to have an emergency corpus as well.
How much should I set aside for emergency?
It is generally advised to have an emergency fund that will help you to meet your expenses for 3 months to 6 months sans your income. You cannot obviously create this fund in a short period of time. You have to build it in due course. Allocate a certain percentage of your income regularly to this fund. Even if you are not able to set aside a percentage of your income, allocate whatever you can. Being consistent is very important here.
How to start building an Emergency corpus ?
Generally it is a habit to set aside this corpus in a savings account. You could also invest in Recurring deposits or Fixed deposits.
But it is more beneficial when it is set aside in liquid mutual funds as it
- Gives better returns
- Is low risk
- Is instantly redeemable (Most of the MF houses lets you redeem up to 50K instantly)
You can use HerAlpha's Spice box saving to invest small amounts (as low as Rs.100 ) in Liquid Mutual Funds for handling your emergency well and inculcate the habit of savings.
It is never late to start one. Build and grow your Emergency Corpus today.
Download HerAlpha app from Google Play Store.
