Table of contents:
How To Save For An Emergency Fund – An emergency fund is your store of just-in-case money. Along with your insurance cover, it is an important part of your financial safety net.
Having an emergency fund can help you roll with life’s unpredictable punches and make it easier to recover from setbacks that could otherwise turn into financial disasters.
How To Save For An Emergency Fund
Experts typically recommend keeping three to six months of living expenses in your emergency fund (an amount that’s probably less than three to six months of your income).
Emergency Funds: Build A Safety Net With Automatic Transfers
Starting an emergency fund is a fairly painless process. But keeping it going (and protected!) is where willpower comes in. Like this:
If you ever need to tap into your emergency fund for a truly unexpected expense, resume your contributions when you are financially able. Don’t be a one-and-done saver!
When you first figure out how much you need in your emergency fund, it can seem like an overwhelming amount. You don’t have to (and won’t) get there overnight, but there are some proven methods to reach your goal:
Whatever account you choose for your emergency fund, it should be somewhere safe and easy to access when you need it—but not so easy that you’ll be tempted to dip into it on a whim.
Emergency Fund: What, Why, How Much To Save And Where?
Last-minute Coachella tickets may feel like an emergency—but alas, they don’t count. Don’t open your emergency piggy bank unless the bill you’re facing is truly an emergency.
You should also try not to use your emergency fund for predictable expenses. If you know your car will end soon, build up a separate new car fund so you don’t have to raid your emergency savings when the time comes.
Your emergency fund is an amount of money that you can tap into if something unexpected happens, such as a job loss, high medical bill or car breakdown. Experts typically recommend setting aside three to six months of living expenses in this fund, although you can adjust it up or down depending on your bills, lifestyle and other factors. Your emergency fund should be easy to access but not so easy that you are tempted to spend it.
It is important to have an emergency fund in case of unexpected unemployment. It is important to have a barf bag and pickles in case of an unexpected pregnancy. — Napkin financing An emergency fund helps you cover sudden expenses, so you don’t have to take on debt or rely on others to cover the costs. That’s usually three to six months of living expenses.
Diversification And Emergency Funds — Vfs
But before you get into the more exciting aspects of personal finance, like investing, you must first save for an emergency fund. It may seem boring – or even unnecessary – to save money for “just in case” events, but having an emergency fund is an important step in your personal finance journey.
An emergency fund refers to savings that you set aside to cover unforeseen expenses. The Employees Provident Fund (EPF) suggests that you keep an emergency fund of at least six months of your salary. If you have other financial responsibilities, or if you have uncertain income, you may want to consider saving more. For example, freelancers who periodically go through dry periods of work or parents with several children may need larger emergency funds.
A broken car, burst kitchen pipes or a surprise trip to the dentist… These events cost money. If you don’t have any savings set aside, it can be difficult to scrape together thousands of ringgit right away. Having an emergency fund will help you cover these costs.
Saving money may sound restrictive, but an emergency fund can actually give you more financial freedom. It allows you to make decisions without having to worry about being limited by your finances. For example, you can take a month’s unpaid leave to care for a family member who has fallen ill. If you’ve been laid off, you can spend more time scouting for a new job, instead of taking the first one offered to you. These choices are possible because you have enough emergency savings to tide you over until you get back on your feet
Reasons To Have A Large Emergency Fund
If a sudden expense arises – and you don’t have enough money to cover it – you may need to turn to credit cards or personal loans. While they can be helpful in a financial pinch, you can incur high interest charges if you don’t pay them back on time.
If you’ve just started working, your first instinct when you run into financial problems may be to ask your parents for help. But not everyone has family who can afford to bail them out in dire financial situations—and even if you did, you might not want to burden them. With an emergency fund, you can rely on your own savings to cover those tight spots without relying on help from others.
Having some savings before you start investing is important. Otherwise, if you encounter an emergency, you may be tempted to dip into your investments to cover the costs. This may force you to sell your investments at a loss. In addition, it may mean that you incur more transaction costs, as you will be buying and selling your investments more frequently. Some investments may also take some time to sell.
Trying to save money to cover three to six months of living expenses can be daunting. If you spend RM2,000 on living expenses every month, that means you need to try to save between RM6,000 and RM12,000! The trick is to work on it gradually.
What Is An Emergency Fund & Why Every Singaporean Needs One
Set aside a portion of your income every month and channel it into your fund. Check your budget regularly to see if you can increase your savings. You will get there eventually.
In the event of an emergency, you need to have access to your money immediately. Having it in a savings account allows you to do that. You can also use the MAE app’s Tabung feature to create a rainy day fund and track your savings.
In addition to that, you can also keep your emergency fund in a fixed deposit, which you can open online with Maybank. With fixed deposits, you may receive an interest charge if you withdraw your money before the employment period ends. Some people get around this by keeping their money in multiple fixed deposits.
Most Malaysians would struggle to cover three months of expenses if they lose their income, so having an emergency fund is a great asset. But that’s just the first step on your personal finance journey.
Building An Emergency Fund With Greater Alliance
Once you’ve created your emergency fund, the next step is to save and invest for other financial goals. This will require a different approach. Instead of just channeling your money into a savings account or fixed deposit for emergencies, you may need to invest it in assets that can generate higher returns. This is where the Maybank Financial Goal Simulator comes in. Whether you’re looking to buy a house or retire early, it helps you estimate how much money you might need to put aside each month to reach your goal. You can also adjust your savings goal and time frame to simulate different scenarios and outcomes. With the Financial Goal Simulator, it’s easy to plan your personal finance journey. “Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The review board consists of a panel of financial experts whose goal is to ensure that our content is always objective and balanced.
Written by Karen Bennett Written by Karen BennettArrow Right Consumer banking reporter Karen Bennett is a consumer banking reporter at . She uses her background in financial writing to help readers learn more about savings and checking accounts, CDs, and other financial matters. Karen Bennett
Edited by Nell McPherson Edited by Nell McPhersonArrow Right Former Banking Editor Nell McPherson is the former banking editor at , where she led a team of reporters dedicated to helping readers make the best decisions about their savings and checking accounts, CDs and money market accounts. Connect with Nell McPherson on LinkedIn Linkedin Nell McPherson
Reviewed by Chloe Moore, CFP® Reviewed by Chloe Moore, CFP®Arrow Right Founder, Financial Staples Chloe Moore, CFP®, is the founder of Financial Staples, a virtual, fee-based financial planning firm based in Atlanta serving clients throughout the country. Connect with Chloe Moore, CFP® on Twitter Twitter Connect with Chloe Moore, CFP® on LinkedIn Linkedin About Our Review Board Chloe Moore, CFP®
Free Printable Emergency Fund Trackers & Charts
Founded in 1976, it has a long history of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in what action to take next.
Follows a strict editorial policy, so you can trust that we put your interests first. All our content is written by highly qualified professionals and edited by subject matter experts, who ensure that everything we publish is objective, accurate and reliable.
Our banking reporters and editors focus on the points consumers care about most – the best banks, latest rates, different types of accounts, savings tips and more – so you can feel safe as you are
