Building an emergency fund is essential if a crisis happens. It’s always a good idea to have money saved for unexpected circumstances. While there’s no standard rule on how much your fund should be, it should cover your necessary expenses for about three to six months.
There are many ways on how you can set up your emergency fund. You can have dedicated savings account to ensure you won’t spend it on non-emergency items, or opt for bancassuranceinsurance, where you’ll have both life insurance and investment, and you can make partial withdrawals if necessary.
Regardless of where you build your fund, the important thing is to follow important strategies to successfully reach your goals.
Start with a Comfortable Monthly Amount
Start saving with a small amount to ensure you don’t stress yourself and your cash flow. For instance, you can set aside PHP 1,000 to 2,000 every payday. Once you get the hang of it, you can adjust your contributions to build up higher savings that can secure your future without financially starving yourself.
Here are some ways to ensure you continuously make progress in your savings:
- Cut Down on Your Budget: You can trim back your monthly shopping, eating out, or coffee habits to allocate more for your emergency funds.
- Spend Your Bonuses Wisely: Put your work bonus, incentives, or tax refund to good use. If you still have debts, prioritize paying those off instead of spending the money immediately.
- Set Up Reminders: Set up an alarm on your computer or phone to help you keep up with your savings goal. Some online banking apps have a reminder feature that you can activate to serve as your regular reminders.
Consider Setting Up Automatic Payments
You can ask your bank to activate an automatic debit arrangement on your account to automatically transfer money to your emergency fund account. This way, you don’t need to stand in long queues to add cash to your account every time. The most effective way of saving money is never touching it in the first place, so automatic payments are a big help in building up your fund.
One of the main benefits of setting up automatic payments is it encourages prioritizing savings over expenses. Just schedule the payment, and you don’t have to worry about skipping on your monthly savings. Here are other benefits of automatic payments:
- Better Schedule: Aside from avoiding any misses on your savings schedule, automatic payments also ensure that your bills are paid on time to avoid any late fees that can affect the allotted money for your emergency fund.
- Payment Safety: Online payment and banking apps have security tools and encryption techniques to avoid data breaches and keep your information and money safe.
- Less Stress: Automatic scheduling takes the pressure off of you because you don’t have to remember. Schedule the payments, and they’re automatically taken care of.
Earn More to Save More
When you get a raise or receive a bonus, it’s tempting to splurge on a new gadget or clothes. However, you may end up with nothing to save on your emergency fund for the month. To have extra money for your other expenses, consider having another source of income for your personal purchases and save more for your emergency fund.
Once you have a side hustle, you can allocate part of your earnings to boost your emergency fund and save some for the things you want to purchase. Remember to set a limit to your purchases to be able to quickly grow your savings.
Some ways to earn extra money are tutoring online, working part-time as a virtual assistant, blogging, or starting your own online business. More side hustles mean growing your emergency funds faster to get you closer to your financial goals.
Don’t Pressure Yourself
Some people may be overwhelmed with growing their savings, but keep in mind that you don’t have to suffer to increase your emergency fund. Give yourself the freedom to spend on things you enjoy, but remember to always spend within your means. Your emergency fund serves as your safety net, but that doesn’t mean that you can’t have room for your wants anymore.
You don’t have to follow the standard bi-weekly or monthly savings if you think it doesn’t suit your income or lifestyle. Even small amounts that you save will make a difference in the long run. Set your own standards – as long as you’re exerting effort to save, you’re on your way to building up your emergency fund.
An emergency fund is not only an essential indicator of being financially healthy. It also reduces the need to borrow money during a crisis that can result in debts, which may affect your financial security for a long time.
Starting an emergency fund can be challenging, but there are a number of tools you can use and strategies you can follow to manage your finances. As long as you have the commitment and discipline to grow your funds, you’re a step closer toward financial stability.