Build Your Emergency Fund

An emergency fund is a stash of money set aside to cover the financial surprises life throws your way. These unexpected events can be stressful and costly.  Some top emergencies are but are not limited to medical emergencies, family emergencies, job loss, unplanned travel expenses, car troubles etc.

An ideal emergency fund would be 3-6 months worth of living expenses or 3 months salary but the ideal emergency fund depends on a few variables such as the number of dependants you have or your lifestyle. If you have kids or look after the parents, you might want to think of adding a bit more to that pot.

This will be used to continue to pay your bills or keep up with monthly commitments in the event of job loss, contracts, reduction in income, decline in client sales etc.

Whilst its hard for most people to build an emergency fund of this magnitude, it’s important to do what you can! At minimum, you should have $3000 in a close by savings account or money market account to tap into for emergencies. The purpose of such savings is to help you handle financial burdens easier. It’s not the job of an emergency fund to earn a high return, the job of an emergency fund is to be there in an emergency.  

Using a credit card for an emergency can be expensive. Credit may be convenient but it’s not cheap and it slowly builds up. If you have to use a credit card in the case of an emergency, be sure to pay it off before interest accrues.

Whatever you do, be sure to build an emergency fund if you don’t already have one.

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