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Reviewed by Sep 23, 2021| Updated on
A significant utilization of a contingency fund is to shield you from depending on credit to meet unforeseen money prerequisites. In the event of a crisis, you don't generally have a lot of cash within reach, and are consequently compelled to take a loan or use a credit card to address such issues, leaving you to pay the interest for years to come. Hence, a contingency fund assists you against taking on too much debt.
A contingency fund enables you to meet emergency financial requirements. It offers you the capability to meet a huge monetary crisis without hindering too much of your daily expenses. Without a contingency fund, the unforeseen emergencies may make a hole in your monetary situation, making it difficult to carry on with day-to-day activities.
A contingency fund helps the business to remain calm when facing unforeseen setbacks. It reduces the monetary stress which helps the business to think and plan carefully the next course of action.