Emergencies usually don’t happen when you expect them to, but they can happen anytime. As 2024 draws to a close and 2025 approaches, one of the most important steps in safeguarding your financial future is to begin the new year with a specific financial objective, like accumulating an emergency fund.
What is an emergency fund?
An emergency fund is a useful tool that ensures stability in unexpected times, not just a safety net for bad times. If you have a financial cushion, you can handle unexpected costs, health problems, or job loss without endangering your long-term financial goals.
According to financial professionals like Manoj Goyal, Siddharth Maurya, and Abhinav R Jain, setting aside three to six months’ worth of expenses is a smart strategy for achieving peace of mind and safeguarding your financial well-being. Starting this habit early in the year can strengthen your financial position.
“For anyone aiming to secure their financial future, starting the year with a focused action plan to build an emergency fund is essential. Unexpected expenses are inevitable, and having enough financial cushion ensures your life and savings plan remain unaffected. Financial advisors generally recommend setting aside three to six months’ expenses as a minimum for emergencies.
Not only does this provide a sense of security, but it also helps make sound decisions during crises. Setting this goal at the start of the year is a powerful step toward strengthening your financial foundation,” said Manoj Goyal, Director of Forteasia Realty Pvt. Ltd.
According to financial advisers, an emergency fund should primarily be used as a safety net for unforeseen life events like losing one’s job, getting sick, or needing urgent repairs.
“This cushion helps mitigate even the smallest risks that could impact your financial stability. By building your emergency fund today, you are securing your future and ensuring that you can navigate hardships without disruption,” said Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited.
“Start by saving three to six months’ worth of essential expenses. One way to achieve this is by setting up a direct deposit into a designated savings account. Then, evaluate your spending habits, identify unnecessary expenses, and redirect those savings into your emergency fund,” said Abbhinav R Jain, Co-founder & Chief Financial Officer of AdCounty Media.
A new year is a great time to start new financial habits to protect your current and future financial security.
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Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
