When to and when not to use your emergency funds

The moment when any of us faces a need to pull out money from our emergency funds is a painful moment. The reasons for the emergency could be varied – from a temporary job loss to an unexpected illness in the family. We are already troubled because of the unfortunate circumstances and battling them, it is impossible to mentally prepare ourselves for such dire situations. At least we can be financially prepared for managing during such situations.

What sort of expenses qualify as an emergency? Can all unplanned expenditures be met by utilizing our emergency funds?

Emergencies with short duration impact – Unforeseen events which impact our monthly monetary budget for a short while. However, these emergencies may not have any lasting impact on our financial stability. Vehicle damage, job loss, theft or loss, minor house repairs, temporary illness in the family, temporary business loss are all typical examples of short-term emergencies.

Emergencies with long term impact – Death of an earning member, lasting physical disabilities, flood, fire and other natural calamities, major health crisis involving an uninsured illness are typical emergencies that completely derail our normal orderly life and throw all our plans into chaos and confusion. Mentally coping with such life altering tragic events is difficult enough. Add to this, the burden of managing the financial impact of such tragedies.

Unplanned but avoidable expenses are certainly not emergencies – There is a frivolous tendency among the youth today to treat a saving or emergency fund as idle money, going waste. They would rather argue – using that money to meet any unplanned expense that occurs is not a bad idea. Mobile phone become slow? Thinking of replacing it? Don’t bother waiting until you have surplus money in your hands. Why not simply pull out money from the emergency fund!? This is a bad idea, and something that we must stay away from. Once we get into the habit of withdrawing from our emergency funds for trivial reasons, it will cease to remain intact, it will just get frittered away. And god forbid, when a real crisis strikes, there will be nothing in our emergency kitty to fall back on.

In essence, any unforeseen expense which cannot be put off and which impacts our mental, physical and financial well being can be broadly considered as an emergency. Such expenses occur completely out of the blue and often require immediate funds to tackle them. We wouldn’t have the time or ability to arrange for funds after the emergency occurs. So its important to set aside some contingency funds for such emergencies which are available for immediate use.

Chit Funds – a secure saving and borrowing instrument, ideal for emergency funds. Investing in a chit fund offers your family / business a financial cushion that you can fall back on during an emergency financial need. Unlike other financial institutions, a Chit fund is more supportive and understands the need for quick cash with minimal paperwork and documentation. A chit fund is like your friend who is always there to help you every time you are in need.Any registered chit fund is a State Government approved institution, thus guaranteeing the security of our investments.

Whether you are a homemaker contemplating running a business from home or an SME entrepreneur or senior citizen looking to park your funds, chit funds offer a simple, hassle free alternative.

Take Shanthala Chits for instance. We are a Government Of Karnataka approved registered Chit Fund operating in Bangalore for the past 25 years. Just walk into our branch at Ulsoor, and we’ll be there to welcome you and to understand your specific needs. Based on your individual capacity and financial plans, we would curate the right Chit scheme for you that suits you best.

Our Chit schemes range from a monthly contribution of Rs 6000 to Rs 1,00,000 to suit every budget. Our chit schemes are for a tenure of 25 Months.

Anywhere in the middle of your investment tenure, if you are in a financial emergency, you can withdraw your prize money with minimal documentation and continue to pay your monthly instalments. No heavy interest burden such as in credit instruments, when you seek a loan.

Financial experts typically recommend that we set aside around 6 months of our monthly budget amount as contingency funds. So that we can avail of this money to tide over our immediate needs in the event of emergency. This is only an indicative figure and may vary depending on each person’s family and business circumstance. If funds set aside are inadequate, then we will be forced to rely on taking a loan. And that would further sink us into a debt cycle which can be very detrimental to our financial stability.

When the Covid pandemic was wreaking havoc over small businesses and companies were facing an unprecedented working capital crunch, our customers were able to tide over this crisis smoothly. Shanthala Chits ensured that our customers received their money immediately, no questions asked.

That was possible simply because at Shanthala Chits, we know every customer of ours by name, we understand their specific backgrounds in depth and we are constant partners in their journey.

We take special care of our senior citizen customers. We provide them with 1-1 personal customer care and endeavour to make their interactions with us smooth, swift and hassle free.

Who said financial dealings have to be strenuous and time consuming? With Shanthala Chits, you can conduct your business with ease and walk away with a secure wallet and a peaceful mind.

Interested? Give us a call and we’ll help you pick the right investment scheme.

Anuradha C

Anuradha is a freelance writer cum corporate trainer in the IT/telecom domain with over 18 years experience. She served in senior technical and management positions in Huawei and TCS for 10+ years. Then gave up the traditional corporate ladder to go solo - in order to escape horrendous city traffic and to be at her own boss!
Anuradha C

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