A Contingency fund is a crucial financial safety net designed to cover
unexpected expenses such as medical emergencies, car repairs, or job
loss. It helps ensure financial stability during uncertain times.
Why Do You Need a Contingency Fund?
Life is unpredictable, and emergencies can arise at any moment. An
emergency fund provides peace of mind.
The 70-20-10 Rule
The 70-20-10 rule is a simple financial strategy that helps with
saving and investment. According to this rule:
70% of your Contingency fund should be invested in Fixed Deposits
(FD), which must be easily withdrawable.
20% should go into your bank savings account.
10% should be kept in hand as cash for immediate needs.
Contingency Funds Calculation
Your Contingency fund must be 6 times your monthly income. The rule of
70-20-10 will help you distribute your funds accordingly.