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Answer:
To prepare for the unexpected, it is important to have a reserve fund set aside. Having a reserve fund is important, but it should not always be your first priority. If you have credit card or other debt, pay that off before you start to put your money in a reserve. Credit card debt has a high interest rate, while the money that you will save in your reserve probably won’t gain a lot of interest. Why not? When you choose a place to save your financial reserve, low risk is key. Remember that your financial reserve fund is for emergencies only. If you have an emergency and need to use it, do. Once you are back on your feet, replenish it. Also, once you have saved the amount you need, stop. Your extra savings will serve you better in an investment that yields higher interest.
Step-by-step explanation:
Words taken from the online site 1 on edge for "Why might a person need an emergency fund?"
The term “emergency fund” refers to helping those times when a person is in need of money. An emergency fund allows you to save on rarer credit interest.
What is emergency fund?
The term “emergency fund” refers to the person's use of money at the time of need. Emergency money is saving money. They improve our financial security and safety. The emergency money is a small amount of money. For example, home repairs, paying medical bills, trip planning.
An emergency fund is money kept in a bank account to cover unexpected expenses like medical bills or car or home repairs. An emergency fund can also assist you in the event of a lack of income due to a job loss or prolonged illness.
Hence, the significance of the emergency fund is aforementioned.
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