What do you need to know about a reserve fund?

We have discussed many possible situations in which you will be happy to rely on your own reserve fund rather than getting into a financial trouble of loaning money. Yet, if you still have not started saving money for your reserve fund, you might be will to learn some basic suggestions everyone should know. This article will show you them.

Calculate the amount of money for your reserve fund

Of course, the more money you have in your reserve fund, the better it is. yet, it is also not about keeping all of your money under your bed as there are many options for investment that can help you to generate extra income with your savings. At the same time, it is not recommended to invest the money of your reserve fund as it should be accessible to you all the time and you should be able to reach out for it any time you need. As you can imagine, the majority forms of investment will block this sum for some time.

That is why you should calculate exactly the amount of money to keep in your reserve fund. It is recommended to keep at least the total that can be used for three month of life according to your current lifestyle with all of your regular expenses.

Yet, it would be even better if the sum you are keeping is enough for over six months of life.

How should you keep your reserve fund?

As it has already been mentioned, a crucial feature of a reserve fund is accessibility and you should take of it in the first place. Yet, it is still not recommended to keep your money just at home as it will be a subject to inevitable inflation and with time you will lose your money. You definitely do not want to do it.

That is why it is advised to keep your reserve fund on a saving account. Do not see it as an investment as you will hardly be able to earn any money with such an account, however the small percentage added to your funds will help you to save this money from inflation.

When you will be choosing your saving account, you should keep an eye on the conditions under which you will be able to pay your money out. Once again, you will want to do it at any moment and certainly you are interested in an option that will not require paying anything for this service.

Crucial takeaways

To summarise this information, you should have at least the amount of money that will cover three months of your life in case there is no income. Additionally, the money should be protected from inflation and, at the same time, it should be accessible to you.