An emergency fund is a fund that you set aside to save you from possible financial stress when something unexpected happens.
Emergency funds should only be accessed in emergency situations.
From my personal experience :
When I had to cease working a few months before delivery due to unbearable morning sickness, I used emergency funds to temporarily cover my ongoing living expenses.
When I was hospitalised due to food poisoning, I accumulated a large sum of in-hospital charges, again the set aside emergency fund came handy.
When I lost my job, it took me a few months to find a new job. It was that emergency fund that saved me from financial stress.
One summer day, the air-conditioning system of my car suddenly stopped working and the repair bill was over a thousand dollars. Again, thanks to the emergency fund.
Emergency funds can be a lifesaver when an unexpected event occurs. It should only be used for emergency purposes and is not for holidays, parties & celebrations, building a new kitchen, etc, etc.
You may wonder how much you should save in an emergency fund? The answer very much depends on your own circumstances. For me, I saved between 3 – 6 months of our net monthly income as we have also set aside funds for non-emergency purposes such as vacations or special occasions.
Alongside we also have different types of insurances for unforeseeable events, for example car, house, home & contents, pets, legal, private liabilities and life insurances. These insurances will cover us from significant financial responsibilities should there be an occurrence in which the emergency fund would not be sufficient to provide so.
