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Saving for a rainy day

Updated: Jan 30, 2020

Contrary to the advice of financial experts, I like to keep a certain amount of money in my bank account. It gives me a warm feeling to see my bank balance every time I log on. And when my husband tries to push me into investing it, I use the “emergency money” logic to put investing off.

But truth be told, I would be better off keeping my emergency money in a savings vehicle that will give me more interest than my bank, yet be available for liquidation at a short notice. Strictly for emergencies.

What is an emergency?

So what are these “emergencies” that I need ready cash for? Buying a house or getting your car serviced or paying the quarterly school fee are not emergencies. They are expenses that you budget for. And save for.

Let’s discuss some potential emergencies below:

Medical emergency

Medical expenses are an emergency that we plan for with health insurance policies. But what about dental emergencies? The cost of a root canal, a bridge or implants can set you back quite a lot. So read the fine print of your health insurance policy to make sure that OPD dental costs are covered. Some policies do not cover dental costs for damage to teeth caused by an accident. It’s always advisable to build a “health fund” beyond just your insurance.

Household emergency

Other emergencies that can put a dent on your pocket are faults arising in your high-cost electrical appliances. Can you live for even a day without your fridge? To take care of such emergencies it is worthwhile to take an Annual Maintenance Contract or AMC for appliances you use every day like your fridge, TV, washing machine, RO, computer or any other appliance or electric equipment you use.

Pink slip

In today’s fluid economy, what if you are laid off? Or what if you are planning a baby and need medical rest during your pregnancy – leave that is not classified as maternity leave? If you are a consultant and a payment you were banking on gets delayed? Bills will still need to be paid. Most experts advise that your emergency savings should be equal to six months of your expenses. This is because, whatever may be the nature of your emergency, having a six months buffer will help you get through your regular expenses of running a home, paying EMI and so on.

Keep your chin up. Emergencies are called that for a reason – they come unannounced. But with a little planning, you can always stay one step ahead.

To learn more about money management, discuss all things money with a community of financially independent women and get personalised guided investing, sign-up for Basis now. India’s only personal finance platform focussed on women.


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