We read and hear news of people getting laid off, someone getting a huge medical bill, someone spending lacs on getting their car repaired because the damage was not covered under insurance. And yet, we refuse to accept that we may end up in a similar situation someday. Psychologists call this *optimism bias* - that enduring, it-won't-happen-to-me belief, no matter what the odds are.
If the odds play against us and we find ourselves in such a situation, it is going to be a very stressful time, and the least we can do to see ourselves through such times is to be financially ready for those situations. The last thing you want to say during that stressful period is, "I wish I had enough money to deal with this!"
That's where an emergency fund comes into play. This 10-min video will help you understand:
What is Emergency Fund and Why Do You Need It? (00:35)
How Much Money Should You Have in the Emergency Fund? (02:15)
Where Should You Park Your Emergency Fund? (06:52)
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