🎯 Goal: Understand the role of a reserve fund and insurance.
You understand the emergency fund (3–6 months of spending) and insurance are the "safety cushion" needed before risky investing, so one event does not ruin you.
Let’s explore
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An emergency fund should cover 3–6 months of basic spending, to stay steady if income stops.
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Insurance shares big risks (illness, accidents) so one event does not ruin you.
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These two are the “safety cushion” to have before risky investing.
Practice activity
💬 Why have an emergency fund before investing in a risky channel?
Worked example: Before buying stocks, you prepare an emergency fund of 3 months’ spending. So if you suddenly need cash, you do not have to sell stocks right when prices are falling.
Quick quiz
1. An emergency fund should cover?
→ 3–6 months of basic spending
2. Insurance helps?
→ Share big risks
3. Before risky investing you should have?
→ A safety cushion (fund + insurance)
4. Why have an emergency fund before risky investing?
→ So you need not sell assets when prices are falling
5. The "safety cushion" before risky investing includes?
→ Emergency fund + insurance
🎯 Real-life mission
Look up one type of insurance and what risk it protects against.