Monday, June 25, 2012

How much money that we should allocate on emergency fund?

Every people supposedly has emergency fund that can be used when they have no money. This money important as the capital for finding another job. It is difficult to newly unemployment to find a job when they have no money.
They also can use the emergency to fulfill the daily necessity. Even you have stopped work; you still need food and drink.
So how much you provide for emergency fund. Some finances expert has different opinion about it. The amount of emergency fund will depend of some factors, such as:
The expertness
Some expert employee has a good position in the company and the company is difficult to fire the expert. The expert is an intangible asset for company that has role to widen the business company. They do not have to worry the company will fired him except the company are really bankrupt. The bankrupt company will fire any employee including the experts.
If you are an ordinary employee and the company does not generate return, you should provide big emergency fund. I believe the company might fired you someday. 
Is your company where you work provides some severance? In my country, most company pay severance six times salary. If your company is very kind, you can reduce the emergency fund and put the money for investment or saving. Some country rules the severance for the employee or labor. However, an outsourced or freelancer will not get it.
Liquid assets
Liquid asset such as cash, precious metal, saving, and other can pay any necessity. These assets can be withdrawn anytime and used for emergency fund. If you have so many liquid assets, you might not need emergency fund.
Various incomes
Some person has multiple incomes from various sources. He or she get the money not only from the salary that the company pay monthly but also the business. They work for the company but they also open a business. The business can generate twice than his or her salary.
Beside business the employee also earn from royalty or goodwill. They create a patent or software that the company should pay it.
The number of family
A man should calculate the family need when calculate the emergency fund. If you have many kids, you have to provide high emergency fund.  The man should not forget what his wife and kids needs.

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