An emergency fund is a money you set aside for any unexpected situations in the future – like a job loss, medical emergencies and disasters. An emergency fund is a necessity and it is important for you to keep it separate from your spending account. It should be kept in an account that allows you to access it within 1-2 days, if not immediately. Typically, your emergency fund should cover at least 3-6 months of expenses.
Insurance is also important to help you and your loved ones prepare for any big emergencies. For example, medical insurance can help finance the majority of your medical expenses, which currently increase by an average of 10-15% a year. Life insurance can also act as a financial safety net if a family’s sole breadwinner passes away. In other words, insurance serves to relieve you and your loved ones of any unforeseen financial stress, allowing them to keep their hard-earned money.
In conclusion, both emergency funds and insurance are a great safety net. Think of them as the shock absorbers for the bumps of life, one that’ll keep you from adding to the load of debt that you already have.
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