There are two funds that every investor should have. 1/ An Emergency Fund 2/ A Sinking Fund Here's what they are and how to create them👇👇 1/ An Emergency fund. What is it? This is a set amount of money that covers your daily expenses for a certain period of time. It should cover your daily normal expenses for a period of at least 6 months.
Why is it important?
1/ It act's as a back-up in case you lose your main source of income.
2/ It helps you tackle financial emergencies without taking emergency loans.
3/ It helps you to avoid selling off your long term assets when you are faced by an emergency
Where should you create an emergency fund?
Ideally, this should be done in a savings account where you can easily access the money.
A Money Market Fund is an ideal place to stack your emergency fund as it has great features suited for this. These features are:
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Your money will be earning interest above inflation rate.
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You can access your money within 2-3 days
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They are low risk avenues. You can hardly lose your money in a MMF.
Only when it is mismanaged can you lose your money. SEE next post for; 2/ A Sinking Fund