In these uncertain times, having an emergency fund is more important than ever. An emergency fund is a money set aside for unexpected expenses such as job loss, medical bills, or unexpected events in life. Starting an emergency fund can provide you with peace of mind and financial security. We compiled ways on how to start building your emergency fund:
1. Calculate Your Monthly Expenses
The first step in putting together an emergency fund is determining your monthly expenses. Rent, utilities, groceries, transportation, and other regular expenses should be included. After calculating your monthly expenses, aim to save at least 3 months’ worth of living expenses (realistically since we are living in the Philippines). This will ensure that you have sufficient funds to meet your basic needs in the event of an emergency.
2. Make an emergency fund goal
Set aside some money for an emergency fund once you’ve determined your monthly expenses. This is based on your income and expenses, and it should be attainable and realistic. Begin by putting aside a small sum each month and slowly increasing it over time.
3. Open a separate emergency fund account
It is critical to open a separate account for your emergency fund to ensure that it is not mixed in with your other savings or expenses. You can check digital banks like Seabank and Maya that offers high interest rate and easy access to your money.
4. Try to automate your savings
Saving automatically is an easy strategy for creating your emergency fund or any other savings goal. Set up a monthly automatic transfer from your checking account to your savings account to ensure that a percentage of your salary is saved saves you time and effort. Currently, UnionBank and BPI are the only banks in the country that provide this service.
5. Avoid from dipping into your emergency fund
Once you’ve built up your emergency fund, avoid the temptation to dip into it for unnecessary expenses. Keep in mind that your emergency fund is is meant to provide a safety net in the event of unforeseen expenses or income loss. If ever that you have to utilize your emergency fund, rebuild it as quickly as possible.
Building an emergency fund is a big part of adulting and securing your financial future. Saving money isn’t all about giving up things you like, it’s also about planning for your future success. With a bit of self-control and determination, you can have financial peace of mind. Start building your emergency fund now to take control of your financial destiny and reach financial security. Let’s do this!