When it comes to managing your own money, having some money put aside for those rainy days is very important. The two common funds which people discuss while planning to save money are the emergency fund and the instant fund. Though both are intended to be used to enable one to deal with an unplanned for eventuality as regards the stingy, they are not exactly the same and they are not the same in that they have different qualities.
Goal:
An emergency fund is a form of security which is meant to deal with large, unpredictable incidents through money management. These might include:
Layoff or loss of household breadwinner or a significant reduction in household income.
Major medical expenses
Situations that force one to use cash to cater for family needs such as paying for a funeral.
Goal:
An instant fund is intended for those situations when you do not have extra money for, but the expense has to be made right now: it is meant to cover such expenses. These could include:
Small medical bills that are out-of-pocket expenses or insurance co-pays for prescription medicine.
Travel for business needs, but not any emergencies (for instance, hiring a car for a family function).
Routine or simple automobile repair or alteration (for example, a punctured tyre).
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Highlight |
Emergency fund |
Instant fund |
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Goal |
To help meet or catering for the major, unpredictable crucial financial shocks |
For instance, to cater for small, close expenses such as paying for fuel, insurance policy, and small servicing costs. |
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Applications |
Be it job loss, expensive medical bill, home injuries, etc. |
Small car issues repair, medical bills, fee, urgent trip |
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Liquidity |
Very liquid but kept in different saving accounts |
Convenient and frequently within a current account, which does not necessarily have to be a deposit. |
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Investing |
They were stored in low-risk types of accounts most probably in saving or money market |
Usually it is not invested; could be kept in a saving/checking account. |
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The necessity |
For crises that could impact on the financial security of the organizations. |
To serve in non-emergency cases, but when they are necessary |
Spend your emergency fund whenever an event occurs that may potentially compromise the quality of life you want to have. This could include events such as losing your source of income, being diagnosed with a life changing illness or both you and your family being involved in an accident or having to pay for major repairs which are beyond your imagination.
Spending on the instant fund should be on expenses that are important and cannot wait till your next payday without causing significant changes in your total financial plan. For instance, in a situation where there is an emergency car breakdown or when you receive the word that a dear one’s funeral will be required in the next four weeks and you do not have the financial capacity, the instant fund will be helpful.
While you are building your emergency fund as a long-term general financial safety net for life’s unexpected occurrences, the instant fund is designed to assist you to cope with small, daily and widespread mishaps that require simple and quick solutions without having to touch your emergency fund. The experts with the core understanding about both the concepts can help you better understand what works well in case of emergency and instant fund.
SOLOMON CAPITAL PRIVATE LIMITED is a Non Banking Finance Company (NBFC) registered with the Reserve Bank of India (RBI). RUPEE112 is the brand name under which the company conducts its lending operations and specialize in meeting customer's instant financial needs.
