Yeah, yeah… you set up your retirement account and you are consistently investing every month. But when something bad happens like an oil shock or a major disease outbreak, have you adequately prepared yourself?

Here are some reasons why you should have an emergency fund:

In case your employment is affected, securing the means to support yourself for the next couple of months is critical. No matter how well you are performing, anything from a recession or a change in management can cost you your job.

The advent of artificial intelligence has also made navigating the job market trickier for applicants — especially those working white collar jobs. A prudent way of navigating this new reality is observing your industry peers. Are they successfully switching jobs in the same industry? For those that did, what do they share in common? It could be something you can upskill in or brush up on before you take the big leap.

If you are also looking at pivoting to another industry, did you take a long, hard look at your own prospects? Overestimating or underestimating your own abilities will cost you in the long run. Making an objective assessment of your employment prospects given your experience, skillset, and temperament will better position you no matter what happens.

You might be finding your job unbearable and you decide to quit. In this case, an emergency fund comes in handy. Sometimes, no matter how hard we try to be optimistic — things just don’t work out, and that’s okay.

Having six months worth of expenses saved up works for almost everyone. However, should you feel that your circumstances require more, don’t hesitate to save up for a longer period. Six months is generally recommended as this is the average time it takes for us to find and settle into new jobs.

It also helps to have peace of mind knowing that you are prepared in case something bad happens. This applies to yourself and your dependents — to your family and even your pets.

It is always good to be responsible.

Think of yourself as a pilot who has a parachute. Just knowing that you have that parachute allows you to fly almost worry-free.

Do not fall into the trap of thinking that you can just redeem your stocks, exchange-traded funds, or bonds when there’s a sudden need for money. It can take some time before you can access that money.

If you don’t have an emergency fund and all your money is in the financial markets, you are in for a lot of pain when a problem is at hand. It is of paramount importance to secure yourself first before getting into investing. Do not treat your own investments as a backup in case things go south.

Similarly, you want to build that nest of yours, and selling your investments when they could be gaining is a missed earning opportunity. Even when the market is not going your way, history has shown that you are better off adding more money into your investments instead of selling.

Everyone would tell you that you have to absolutely put your emergency fund in a high-interest savings account — be wary that this is a partially complete recommendation.

Yes, a high-interest account will give you the most bang for your buck as it should minimize or sometimes even beat inflation.

But is your chosen bank or fintech or app always accessible? Is it always available? Those are questions you have to ask yourself before deciding.

One last thing, do not make the mistake of locking your emergency fund into a time deposit. Just keep it in a standard savings account where it is always available. Having money designed as your fallback option in a time deposit will just complicate things.

Your main concern should always be availability.