How many of you would have thought of the lockdown due to COVID 19? The importance of emergency funds has never been apparent. Recently I read, 65% of home buyers expected to default on their installments . Well, events like COVID 19 are extremely tail events. Nassim Nicolas Taleb in his book "The Black Swan: The Impact of Highly Improbable" defines a Black Swan is a highly improbable event with three principal characteristics: It is unpredictable It carries a massive impact We explain it in such a way making it less random Why we do not acknowledge the phenomenon of black swans until they occur? By nature, humans are not hardwired to learn specifics when they should be focused on generalities. We focus on things we already know and time and time again fail to take into account what we don't know. Just imagine - what if lockdown is extended to a total period of three months? There arises the need for an emergency fund. In this blog - let's ...
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