The statement "A cushion of 2% is usually enough to account for unplanned expense" is False.
Here's why:
1. A cushion of 2% is generally considered too low to account for unplanned expenses adequately. Unplanned expenses can vary in size and can often exceed 2% of a budget, especially in cases of emergencies like medical bills or major car repairs.
2. Financial advisors often recommend having an emergency fund that covers 3 to 6 months' worth of expenses to ensure financial stability in case of unexpected situations. A 2% cushion would likely not be sufficient to cover such scenarios.
3. It's essential to plan for unforeseen circumstances by setting aside a more substantial emergency fund or cushion to avoid financial stress or hardship when unexpected expenses arise.
In conclusion, while having a cushion of 2% may provide some minor protection against unforeseen expenses, it is generally not enough to fully account for significant unplanned costs, making the statement false.
