The personal finance of every family is very important. Each individual should have a financial plan of their own. Other than the contingency plan that they have as a family, the individuals also need to ensure that they have their own plans. It is important that the family as well as the individual plan well so that they are not in any kind of financial crisis because of various emergency situations. Some of the situations in which the financial planning with adequate allocation to the contingency fund will help are listed here.
- Health problem: In case there is a health problem to one of the family members, then you need to ensure that you will have to make sure that you try and get the person treated for the disease. The situation that can arise is that you will spend a lot of the money on the treatment. Other than this, the health problem could also cause the sick person to lose the job. These situations can arise anytime and when the person loses their job, the family needs to sustain though the difficult days and the money from the contingency fund is used to sustain during these difficult day.
- Disability or death of main earner in family: The main person who is earning the bulk of the income in the family will be supporting the family to a great extent. This person will be meeting the financial needs of the family and may have bought a house and a car. These purchases would be made with the help of a mortgage. The result of this is that every month, a bulk of the salary would go for the repayment of these mortgages. In this situation, if the person who earns the bulk of the family income dies or even has a disability, then the result is that the repayments will not be possible and there could also be difficulty in sustaining the regular lifestyle. This is the reason for the family to have a contingency fund.
- Loss of job: The loss of a job due to the economic recession or because of any other problems is another factor that could cause the family to go through a lot of hardships. There are many families that are struggling all the time because of the loss of a job and the result is that they undergo increased family strife leading to divorce and breakups. This can be averted by saving money in a contingency fund and using it in time of need.
- Sudden financial crisis: There are other situations when you may face some sort of financial crisis too. This is a situation in which you will have to overcome. This phase of financial crisis could be a very short time or it could be a longer phase. Whatever the time period of the financial crisis, the family has to cross it and this will be possible with the help of the contingency fund that has been saved. The contingency fund should be easily accessible so that the financial crisis is met and overcome successfully.