How to Build an Emergency Fund (Even If You Have Other Expenses)
If there’s any reason to save money, it’s to save for emergencies. Forget the fancy new phone, laptop, shoes, etc. Save for that emergency fund!
Okay, that might be a bit inaccurate. You can have an emergency fund and save for fun things at the same time. Nonetheless, you should make saving for an emergency fund your first priority.
Why does every Pinoy need an emergency fund?
Life in the Philippines is unpredictable. Health issues, typhoon damage, car accidents, broken appliances…we could talk forever about unexpected things that could happen.
An emergency fund can cover something as simple as an event that requires you to buy a new suit or dress, or something as major as house repairs.
How much should an emergency fund in the Philippines be?
The general consensus is that the cash equivalent of two to three months of expenses is the minimum for an emergency fund.
Why two to three months? Leaving a job is a situation where you’ll need some cash backup until your income becomes more stable. The emergency fund should, at least, cover that situation.
It’s always good to strive for a higher amount for your emergency fund, though. You can aim for nine months, and you’ll definitely sleep better at night knowing you have that much kept away.
Where should you put an emergency fund in the Philippines?
Put it out of sight and out of mind, but somewhere easy to access.
Starting an emergency fund is as simple as opening another bank account and depositing money to it every once in a while. It’s also possible to put the money in the bank account you’re already using. But that means watching your balance and making sure that it doesn’t go below a certain amount. You won’t need to worry about that with a separate account.
It’s not necessary to have all your emergency funds in the same place. Wherever you put it, the most important thing is that it’s easily accessible. If you need the money, you should be able to withdraw it quickly.
How to build an emergency fund in the Philippines
Channel a part of your income to your emergency fund until you have enough.
If you already have some savings from before you started working, you can put part of that away. If not, and cash is tight, you can start saving as little as 15% of your salary.
This might seem like a lot, but if you track your expenses, there will definitely be something you can cut down on. Cooking at home can cut down on costs from eating out at restaurants. Unsubscribing from unused monthly services, such as cable or gym memberships, is another good idea.
Take advantage of services that will help you save money too. For example, paying bills online or buying load with Coins.ph lets you earn rebates. These small amounts can go a long way into helping you build your emergency fund, so try not to spend them.
Sometimes, no matter how well you budget, your income won’t be enough to build an emergency fund. In that case, you need to take on side gigs to help boost your savings.
The emergency fund is a bit of a misnomer because it implies that it’s different from a savings fund. At the end of the day, emergency funds are just savings under a different name. Health and financial safety should always be a priority. After all, isn’t that what we’re all really saving money for?