How to build an emergency fund – Find out

Emergency funds are specifically created for unprecedented life events that could occur uninvited. These funds should also be set aside, in case there is a job loss in the family and the family needs to incur expenses until another job is found.

Shiv Parekh, founder of hBits, says: “IMEs on home and auto loans, tuition fees, etc., for a period of six months to a year, in the event of financial crisis, health problems or death of the winning member also needs emergency funds.

Therefore, for an emergency fund, it is suggested that investments be made only in specific assets that generate safe and stable returns and provide high liquidity. So that they can be sold instantly when the need arises.

How to set up an emergency fund?

To set up an emergency fund, Parekh explains, “you have to set a target date, take stock of existing assets, set aside a lump sum as part of a system of open-ended funds that can be withdrawn by emergency of any kind “.

For an emergency fund, it is suggested to take a monthly commitment from your fund and try to have a different or separate account for accumulation. Experts say this is the basis for building a corpus for an emergency fund. Once the base is built, funds can continue to accumulate.

How much should you have as an emergency fund?

Depending on your income and expenses, an emergency fund can equal three to six months of monthly income. That said, start small. Start setting aside a small amount of money, then slowly build up your body.

Should you consider fractional ownership to build an emergency fund?

Commercial real estate is known to be a good option for building up an emergency fund, however, the high purchase price is often a deterrent. This is, says Parekh, “one could consider a commercial real estate investment through fractional ownership which allows market participation through the purchase of pre-let commercial property in Rs 25 lakh banknotes, which makes it affordable for the average investor ”.

According to some experts, the main reasons to consider fractional ownership to create their emergency fund are liquidity, stability and assured returns.

Fractional ownership generates rental income of 8-10% per year and capital appreciation of 5-10% per year, resulting in high returns. Parekh adds, “It’s more liquid than residential real estate because it’s easier to find real buyers and liquidate the investment.”

Many timeshare platforms also help homeowners list their property on the site with an average liquidation wait time of a few months. Experts say the relatively low wait time means there is no need to close a distress sale and lose your capital investment.

Parekh says: “Individuals looking for a place to park their wealth can consider fractional ownership in combination with other options like cash funds. The monthly rent from the investment can increase income and help overcome an emergency.

He adds, “One can also sell the investment at a profit in case he or she has to meet a large demand for funds. A unique model that combines security, liquidity and good returns, fractional ownership is a great option for storing and developing an emergency fund.