Building an emergency fund? Here are the mistakes you need to avoid

Life does not always go as planned, but an emergency fund can help you stay financially. Women face unique challenges, such as payment gaps, career breaks and care, which makes this safety net even more important. A crucial part of financial security is to know where your money comes from, as highlighted in Rights. Equality. Empowerment., A recent white book focused on strengthening women’s finances. The more you understand your finances, the better you will be prepared. Although it is important to have an emergency fund, it is just as important to avoid these common mistakes while building one.

I do not save enough

An emergency fund must be appropriate to respond to your changing needs and should be able to ideally cover the essential expenses worth 6-9 months. Review your monthly expenses to identify expenses that are not negotiable, such as rent, utilities, EMI payments, medical care or child care and set a reasonable target for your fund.

Ignoring the impact of inflation

Increasing life costs affects purchasing power and economies. For example, an emergency fund that was sufficient in 2015 is unlikely to be sufficient in 2025. Therefore, it is crucial to review your periodic fund and adjust it to align your needs and increase costs.

Expenses without restoring

Your emergency fund is like your savings would fall if you sink into it and you need to refill whenever used. If you have had your emergency fund, small but regular contributions can help you restore it so that you are well prepared for any future emergency.

The wrong choice of the wrong economy

Can you quickly access the emergency fund when needed? Is it sure? Will it grow while it is untouched? Choosing the right place to build the safety reserve is important. Tools such as liquid mutual funds, high -interest savings or fixed deposits are some options that balances liquidity and security, also providing some profitability.

Using it for non-essentials

When facing a cash crisis, the prioritization of the essential elements is crucial and the same is applied to your emergency fund. Its use for non-urgent expenses, such as meal, obtaining premium subscriptions or gadget updates can exhaust your fund, leaving you financially for any future emergency. To avoid this, talk to your family what qualify as an emergency and what expenses should cover your fund.

Believing that you don’t need one

No matter how stable your income is or how well you manage your money, a safety net is essential for unexpected delays. An emergency fund is essential for financial independence.

Regardless of the path you choose – building a career, managing a family or planning a career break – a safety net is indispensable. Avoiding common mistakes will help you build an emergency fund that allows you to control and give you confidence to cope with any challenge that your life offers.

(The author is Senior Manager – Communications at BankBazar.com. This article was published as part of a special agreement with Bankbazar)