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How to build an emergency fund

How to build an emergency fund

Emergency fund is as staple as rice.

http://www.genevieveng.com

Why is emergency fund important?

Emergency fund is probably the first component of your investment or savings portfolio. Because it provides you safety net to whatever life has to bring. Whether it is a sudden health consideration, job loss, or a house damaged by the typhoon, emergency fund will come to the rescue.

Experts say that three to six months worth of emergency fund will be enough at the least to cover monthly expenses in case there’s no stream of cashflow getting into your pockets during this period.

How do I save up for my emergency fund?

Depending on your income, you can start small and consistently put money into this particular fund. You can start by saving up about 10% of your income, and gradually increase it when circumstances allow you to do so. Best to open a bank account dedicated to this. For some, they want the money easily accessible such as in ATM cards so that when emergency happens, you can withdraw funds anytime. While for some, they convert the fund into a mutual fund or UITF once the fund has reached more than six months worth of money. Some opt to open a time deposit account, while some love to leave it accessibly at their piggy banks at home.

Bottomline

I’m sure most of the savers and investors nowadays are attracted to the booming stock market ever since the Philippines became one of the hottest equity markets globally. However, though the attraction does not have to leave you, emergency fund may be a neglected fund, but it is truly important to have such safety net. Such that when things go wrong with the other risky investments, you have some cash in the event.

Remember, emergency fund is as staple as rice to our portfolio.
Cash is king!

Here are our monthly financial education campaigns to date:

January 2013 – Inside the Philippine Stock Market
February 2013 – Welcome to the world of investments, young professionals!
March 2013 – Move your Financial Quotient to Higher Levels
April 2013 – Ultimate Newbie Month

May 2013 – Emergency Fund is as Staple as Rice (this edition)

The monthly financial education campaigns are part of my dream financial literacy project called “Project Pera” – a humble advocacy dedicated to reach out to our fellow Filipinos and assist them by providing information necessary for them to achieve Filipino Financial Freedom.

Pilipino, Pagyamanin mo and bawat Piso.

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