What is the emergency fund?

The Emergency Fund is simply a reserve fund dedicated to solve unexpected debts that are beyond the range of the usual operating budget. This model of maintaining reserve money as a protection against possible loss in the event of an emergency can be used in a number of situations. Governments, private enterprises and even individual households can set up and maintain an emergency fund within the overall operation of the operation.

In the government environment, the Emergency Fund is often marked as a renewal fund after a disaster or an assistance disaster fund. Generally, the conditions of use for reserve money introduced into the fund will be clearly defined. This event allows local and national governments to provide assistance to citizens and municipalities if there is a type of natural or economic disaster if the action encounters a qualification established for the Fund. Other times, the government can create an unforeseen event as a advance against possible losses in income from taxes and other sources of income. In the event of this, the government can drawFrom the Fund of Emergency Drives to cover operating costs and maintain key public services such as enforcement of law and functioning of urban services.

Businesses also use the model of the emergency fund. As with governments, many businesses decide to create a fund that can be invited if income does not meet general business expenses. For example, the emergency fund can be used in unexpected repair or replacement of key production equipment. At the same time, the Pivot Fund can be used to cover the general operating costs if the sale of the company is carried out by unexpected immersion due to natural disasters or political shocks.

For home, financial advisors often encourage the provisions of the emergency fund. Many experts will urge households to create and maintain an emergency fund that contains enough resources to cover the usual expenditurewith a domestic budget for six months. This level of protection helps to protect individuals and families from such unexpected events as a serious and long -term illness, loss of employment or destroying a house during a natural disaster.