Having some form of financial security is essential for everyone. With emergency funds, you will be able to have some peace of mind. And this is since you can face them with no worries at all. Because you don’t feel prepared for any sudden expenses.
Having emergency funds will be important for your family’s financial well-being. By learning more about an emergency fund, it will assist you better prepare for any unexpected event. Also, those who will not have put aside some money will start saving too.
How then can you manage your emergency fund?
Here are some things you need to know about emergency funds.
What Is An Emergency Fund
Though we may be familiar with this idea and how it is utilized, let’s start by learning first where exactly these funds can be used:
- Insurance repayments and much more
- Medical needs/accident
- Some unexpected real-life challenge.
- After you lose your job.
- Catering for needs of those who depend on you.
What Emergency Fund Is Not
Emergency cash will not mean that you are in a condition where you are reducing your daily expenditure such that you are left wanting more. Or you are ever in a place where you have less than what is needed.
Instead, this is simply a concept of saving and then working smartly and efficiently with your surplus. The idea behind this is that you meet your present-day demands and also have something to secure your future needs.
Actually, an emergency fund is not some kind of punishment; considering not being in a position to use the money and putting it aside might sound so.
How Much Should I Save?
Have you ever wondered how much is enough to have in your emergency kit? Maybe about half a years of expenses? Actually, the answer will depend on your financial standing. However, one rule of the thumb is that you have enough cash to cover 3 – 6 months’ worth of your living expenses.
So, for instance, when you are laid off, you will have some money to live off of. This you can use to cater for necessities as you find another one. Or the cash can add-on to your unemployment payments.
So, How Do I Start?
Always come up with a method for the set action plan. Then stick to it. At this point, it is recommended that you come up with goals that are achievable. Avoid making a policy that is a far-fetched concept, or just a plan since such plans typically don’t happen.
How can you establish an emergency fund?
Start small: Start out small, do not aim for big plans as yet. Find a balance such that you are comfortable, often where you are sure you can make contributions. There is no point in having big plans then running down back to the start.
Avoid going straight to cutting down your needs. Instead look for any amount that is overflowing and it’s being used in the wrong place. You can bargain and be sure to think before spending and this can have a major positive impact on your savings.
Look for options: There are endless ways that you can use to start an emergency fund. For instance, you can decide to take public transport, go to the mall with a shopping list, setting up carpool, etc. Such small changes can, in the end, make a major difference in your finances.
Set sound milestone: Avoid getting carried away here. Do not load yourself by making huge choices. But, rather come up with some reasonable milestone on the go and as you move up. Here you need to consider having and allowing for some room to continue optimizing and altering your plan.
And soon enough, you will have an emergency fund’s pool that you could use just about anytime but depend on your current needs. In other words, an emergency fund is an amount that you will typically spend or waste where it’s less needed.
So, when you can reduce your spending on something, and because it is an accumulation of all. This amount can turn out to be large, that is large enough to cover nearly all of your exigencies.
Why You Need An Emergency Fund
As you are wondering why you need to have an emergency fund. Rest assured there are several options that you can access. These are aimed at helping you out as an alternative one of which would be getting a personal loan. Also, you can use payday loans issued by legal moneylenders in Singapore.
Even though this route is not the most ideal. It certainly can go along way. With this moneylender personal loan amount, it can help you take care of your current pressing issue. Hence it gets handled much faster than when you are to rely on other sources of funding such as the banking institutions.
Where Do I Put My Emergency Fund?
Since an emergency situation can occur at any time, it is critical that you have quick access to funds. However, the account needs to be separate from the bank account you normally use daily. This way you will avoid falling into the temptation to dip into the reserves.
A good place for your funds would be the high-yield savings account. This is federally insured to a total amounting to $250,000, therefore it is safe. There your money will be earning interest, and it is easy to access quickly whenever it is needed. This can either be through funds transfer or withdrawal.
As you make your savings, be sure to separate emergencies from everything else. Actually, once you have attained a reasonable amount of savings, it may be a good idea to start another savings account for inevitable but irregular items like vacations, clothing and car maintenance.
With this in mind, consider saving for the unforeseen situations. By having some funds in reserve could be what makes the difference between getting deep into debts or weathering a passing financial storm.