It is natural for life to have ups and downs and it is not known when a challenge will come in front of you. Therefore, it is very important to be prepared in advance. For this, it is necessary to create a strong emergency fund, which will help you handle finances in difficult times. This fund will not only protect you from financial crisis but will also keep you away from the situation of taking a loan.

Everyone's financial situation is different, so the size of an emergency fund depends on your lifestyle, dependency on family members, and sources of income. Generally, financial experts recommend keeping an amount equal to 6 to 9 months of expenses in a fund. This period can also change according to the stability of your job and income.

How to create an emergency fund?

The purpose of an emergency fund is to give you financial security, and for this, some easy suggestions are being given.

Make a clear goal - First, decide what your monthly expenses are and how much amount you have to keep in the emergency fund accordingly. Decide the amount according to 6 to 9 months of expenses and deposit it gradually.

Keep an eye on monthly expenses- Make a list of expenses and cut down on unnecessary expenses. After this, put the remaining money in the emergency fund.

Auto-transfer facility- Set up an automatic transfer to transfer a fixed amount from the savings account every month directly to the emergency fund. This will lead to regular savings.

Investment in liquid funds and mutual funds- You can invest the emergency fund in liquid funds so that it can be easily withdrawn at the time of need. Debt mutual funds can also be a good option.

Cut down on unnecessary expenses- Do not spend on unnecessary things, such as eating out frequently or shopping unnecessarily.

Use sudden money- Add the extra money received through a bonus, tax refund, or any other means to the emergency fund.

Avoid debt- Avoid debts like credit cards and personal loans and if you have taken a loan, repay it as soon as possible so that your financial condition remains better.

Review regularly- Review your fund regularly and make changes to it according to your needs.

Precautions before investing in mutual funds
Keep in mind that mutual fund investments are associated with risk. Before making any investment, read the relevant documents carefully and consult a financial advisor.