What is emergency fund? It is important to know by heart what this thing is all about otherwise we won’t be staunch to effectively save up for this purpose. The amount of cash set aside for any unexpected costs like illness, something wears out that needs immediate repair and all other financial surprises that comes into our way is referred to as emergency fund.
Whether we like it or not, emergency can come into our way anytime of the day and without sufficient fund reserved for times like this, is absolutely stressful. So, here comes the crucial QUESTIONS – ‘Are you prepared to handle that stress?’ or ‘Are you financially prepared to cover emergency expenses?’
When to start saving for emergency fund?
The earlier we start building an emergency fund, the more prepare and capable we would be to absorb the financial shocks 24/7. It’s always best to have sufficient emergency fund set aside to cover unexpected expenses of three to six months. The earlier you start, the better.
Is emergency fund necessary?
If heavy rain or typhoon visits your neighborhood, the thing that you should worry about is where to get money to cover the costs for repairs of damaged properties. With your emergency fund on stand by, you don’t have to scramble to get the money you need because you already have the fund waiting to be called for use. Additionally, with emergency fund on hand, you can focus your mind on handling other tasks and let the emergency fund handle the rest.
How to start building emergency fund?
Now that we identified the points as to when to start saving for emergency fund and its importance of having one, now let’s talk on how to start building emergency fund.
1. Small Cuts Adds Up
Start building emergency fund by cutting off small amount from your income. Doing this on a regular basis every time your receive your paycheck, eventually boosts your emergency fund significantly.
2. Look for Money Leaks
Are you into the habit of visiting Starbucks 7 times a week for your favorite espresso or cappuccino? How about reducing it to four times a week? I am a big Starbuck fan but I don’t consider going there everyday a need but simply because I just want to indulge my cappuccino cravings. Don’t leave lights on when not using, use SMS instead of calling significantly reduced your monthly expenses, thus, you will be able to add more saving to your emergency fund.
3. Automatic Fund Transfer
Have a separate bank account for emergency fund. From your savings account where you receive your monthly salary, schedule automatic fund transfer every month to that account allotted for your emergency fund.
4. Make Cash From Trash
Look around your house. Did you see those piles of empty tin cans and bottles? Those dusty plastic toys? Don’t keep them unless you have plans of converting your house into a warehouse. Sell all these stuff.
Having an emergency fund can mean achieving financial gain in the long term if remained unused and at the same time protects you from unexpected financial set backs when the time of need arises. So,start building your emergency fund now.