A contingency fund is an important part of financial planning
Bengaluru-based IT professional Amit Kumar, who worked at the R&D centre of an American multinational company, had been doing well in his career. But one fine day, he was informed that he had been laid off as part of a global restructuring programme. The company gave him four months salary as compensation.
Kumar, 40, was shocked. He had a family to support—two school-going children and a homemaker wife. He had recently invested in a two-bedroom apartment in the city and had EMIs to pay. The severance package was just not enough to sustain him till he got another job. Kumar, however, had a habit of saving regularly for a contingency fund. And that was enough to manage for at least a year. Kumar landed a job in a few months, though not at the same level. The only thing, according to him, that helped him deal with the crisis was his contingency.
“One needs to do away with the ‘nothing-will-happen-to-me’ attitude,” said Sasikumar Adidamu, chief technical officer, Bajaj Allianz General Insurance. “Appropriate financial planning is important to live a life of dignity. One never wants to be in a situation where one has to borrow money to fulfil basic necessities or live hand to mouth. To avoid such situations, it is vital to have a contingency fund set aside that helps you deal with emergencies.”
Personal finance experts unanimously agree that contingency financial planning is a must. There can be unforeseen expenses in every sphere of life—a medical emergency, job loss or transfer. Prudent systematic saving and investing in various financial tools to meet such emergencies is an important part of maintaining financial stability.
This story is from the April 14, 2019 edition of THE WEEK.
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This story is from the April 14, 2019 edition of THE WEEK.
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