The Right Time To Use Emergency Funds, Here's The Explanation

When To Use Emergency Funds (Essinger-Unsplash Travis Image)

YOGYAKARTA - Have you heard the term emergency fund? The reason is, emergency funds are one solution for us When experiencing an unfavorable situation such as; job loss, suddenly illness that is not covered by BPJS and all other urgent needs. So, when should you use emergency funds?

Everyone should have emergency funds, whether single or married. Because, collecting these reserve funds has many benefits, especially in better financial management. Then, how much is the ideal emergency fund?

In this post, it will be discussed in detail the amount of emergency funds, starting from the benefits, the ideal amount, how long we have to use it. Come on, follow the explanation below!.

What Is An Emergency Fund?

Launching from the official website of the Indonesian Ministry of Finance, emergency funds are funds that are deliberately prepared to be stored as a form of anticipation in an emergency situation that is not expected to occur.

The availability of emergency funds can also be a marker of each person's financial health, especially those who are married.

That is, with this emergency fund, you do not need to sacrifice your basic needs or spend money when you are required to spend some money due to unexpected situations.

Given the purpose of the emergency fund to increase financial security when experiencing unexpected expenses, this fund should be disbursed at any time without having to wait a certain period.

Benefits of Emergency Funds

Emergency funds are very meaningful because they can provide financial protection when experiencing unexpected situations.

Not only that, there are many benefits of emergency funds, here are some of them:

As the name implies, emergency funds can be used during urgent, emergency, and not previously expected. There are also several circumstances that allow you to use emergency funds, namely the following:

When you have used the funds for the urgent interest, make sure you save again so that you are more prepared when the situation happens again.

Ideal Emergency Funds

The amount of emergency funds that is ideal for each person is actually various, depending on the living budget for basic needs and other aspects such as your lifestyle, age, occupation, and health conditions.

However, many financial experts recommend an ideal minimum amount of emergency funds of 3-12 times the monthly expenditure, depending on the circumstances and the accompanying factors. According to the official website of the Ministry of Finance, here are the details of the ideal amount of emergency funds:

Thus, if you experience an emergency situation, some kind of job loss and have 6 times the reserve of funds per month, then you have 6 months of fund supplies.

The hope is, maximum in the 7th month You have income and return to work again.

Emergency funds are recommended to be stored in a safe and easy financial instrument. So, you should not put too much emergency funds in excess, such as 15 times.

Because these funds tend to be less profitable. Instead, you can raise the more funds for investment or more profitable instruments.

We also wrote '3 Ways to Calculate Emergency Funds' so that it is easier for you to manage emergency funds later.

So after knowing when to use emergency funds, see other interesting news on VOI.ID, it's time to revolutionize news!