Is the savings account a good option for emergency funds? | Personal finance news
Life can surprise you with nasty incidents and accidents. Whether it’s an unforeseen medical emergency or the loss of your job, some of them can have a significant financial impact on you and your family. So, it is always wise to have a backup plan, especially when it comes to your finances.
Financial planners suggest that six months of spending should be allocated to create an emergency fund. However, this may vary depending on the different financial situations of different people. Nevertheless, it is crucial for everyone to maintain an emergency fund to overcome critical times.
The importance of having an emergency fund
An emergency corpus is the money you set aside for emergencies, other than savings. You can count on this money to support you during a crisis and help you get through it without borrowing money from banks, friends or relatives. In addition, having emergency cash will give you immense peace of mind and put you in a better position to deal with the crisis.
How a savings account can help you in an emergency
Once you have decided on how much you want to set aside for an emergency, the next step is to determine where you want to store that money in a safe place. It is not entirely safe to keep emergency cash in your home, as it can be destroyed or damaged in a natural disaster, fire, can be stolen in a theft. A savings account is the best place to park your emergency funds.
There are several reasons why a savings account may be the best place to save your emergency funds. These will be discussed below.
Easy access to cash
One of the best features of the savings account that makes it ideal for parking your emergency funds is free access to cash. In this account, you do not compromise your ease of access to emergency funds and keep them safe, because the bank takes great care in protecting your funds. It is the safest and most liquid option where you can easily save and access an emergency corpus.
Balance between saving money and earning interest
An important benefit of saving your emergency funds is that you can earn interest on them. This way, you get a double benefit by keeping your emergency money in a safe place and growing those funds by earning interest.
No minimum balance required
Many savings accounts have a minimum balance requirement of zero. This can be of great benefit to you in times of crisis. Suppose you are facing an unexpected cash shortage and want to withdraw money from your account. In a zero minimum balance account, you can delete as many as you want without worrying about not meeting the minimum requirement and having to pay the penalty.
High yield savings account
A high interest savings account allows you to receive a higher interest rate than a standard savings account. So you can withdraw money without worrying about spending because the interest rate is higher than other accounts.
A savings account has the dual purpose of saving emergency funds while generating interest on them. You can also make an emergency payment directly from your phone using the UPI payment option. Today, everyone wants to become financially independent from a young age, and saving an emergency fund is the best way to ensure complete financial freedom.