What is the Emergency Reserve?
Sometimes we lose control of the accounts and your earnings are not always able to cover all the expenses that appear unexpectedly and that end up causing a loss. Therefore, having an Emergency Reserve, which is ideal at this time, can help you avoid excessive expenses, in case you have to resort to another banking option, such as overdraft or run the risk of entering the revolving credit card .
So we are going to explain what an Emergency Reserve is, it is an amount of money that you set aside to cover urgent expenses, which is not part of your financial planning. Thus, if you use the Emergency Reserve, you will prevent your income from being compromised and your monthly recurring bills from being delayed.
What is the difference between Emergency Reserve and Investments?
Come on, for those who have investments and want to make an early redemption to cover expenses, it is possible that they will have many unexpected expenses and thus they will have a much greater loss than they imagine. In addition to not obtaining the expected return by liquidating the investment before the expiration date, you, as an investor, end up proposing a more expensive taxation, as happens in applications with the regressive income tax collection table.
As for the Emergency Reserve, you should not consider it as a medium and long-term investment portfolio. But you should know that it will be available to you when you need it and at the lowest possible cost to make a withdrawal. So even if they are available, it also generates income. Yes, you can add the amount you want to make a reservation and leave that amount applied, generating profits over time and not needing it.
How to make an Emergency Reserve?
Just so you know, the ideal amount to have as an Emergency Reserve is the equivalent of three or six months of your average monthly spending. So there are people who can add an amount that will cover up to a year of their expenses.
If you still don't know what the ideal value should be, you should list your recurring monthly expenses and multiply it by six, as this calculation will find out how much you need to have for a semester. Separating around 5% to 10% of your income per month. Therefore, this amount must be invested in applications, with high security and high liquidity.
You must be aware that the emergency must give you the assurance that it will really help you in time of need. You must invest in conservatives, which guarantee a return, but without taking risks. Its applications must also be accessible in the sense of offering practicality in the operation, especially when a ransom is needed. Therefore, it is important that the liquidity is fast. There are options with same-day or next-day redemption, but it's worth checking how long the money will actually be in your account.
Where to invest?
Taking into account the advice we have given you so far, you should know that you have some applications that can bring income to your Emergency Reserve, so we are going to tell you two places where you should invest and make your Reserve: CDB and Selic Treasury.
Now, with our tips, take the opportunity to start making your Emergency Reserve and never again be caught by surprise and get stuck.