Why an Emergency Fund is Necessary in the Philippines

Life is filled with uncertainty. With an emergency fund, you can say you are prepared for what’s to come. Having an established emergency fund serves as the cornerstone of wise personal finance. Here are some situations in which having an emergency fund is helpful.

• Employment loss
• Accidents that may require
• Significant life changes

Aside from life’s uncertainty, the global pandemic has made those even more abundantly evident. Whether it’s your work, property, health, or savings, anything you have now could be gone tomorrow. The existence of an emergency fund greatly influenced the present pandemic. The question remains, why is an emergency fund necessary?

What is an Emergency Fund?

If anything terrible occurs, having an emergency fund could save your life. In simpler terms, an emergency fund is a type of personal funding set aside to cover unforeseen expenses.

When you have an emergency fund, you don’t utilize it to make impulse purchases or take a trip out of town. Those are not the type of situations that should require you to spend your emergency fund. Emergency cash must be set aside for situations like an unplanned hospital stay (particularly with COVID-19), job loss, or a car that breaks down and needs extensive repairs.

How Much Money Should Be Put Aside for Emergencies?

An emergency fund does not have a set size. Depending on your living costs, however, as a rule, your emergency fund should be sufficient to pay for your living expenditures for three to six months. The idea is that, should anything occur that prevents you from working, your emergency fund should be adequate to pay for your daily costs for at least six months. When calculating their emergency fund, some people just consider the absolute essentials (such as food and utilities), while others decide to include a few pleasures to assist them to maintain their standard of living.

What Constitutes a Real Emergency?

An emergency fund can be used in a variety of ways, and it can also be abused in a variety of ways. Therefore, it is critical to define what constitutes a financial emergency.
A big, unforeseen expense that necessitates quick cash utilization is a financial emergency. These consist of:

• job loss
• unanticipated medical costs
• unexpected car trouble or an accident
• unexpected big home repairs like a roof or electrical system failure
• family member passes away
• when a family member gets sick, and you have to leave work to focus on taking care of them

Things that are not categorized as emergencies:

• elective medical procedures like LASIK eye surgery or cosmetic surgery
• vouchers for discounted travel
• a destination wedding invitation
• purely aesthetic home renovations
• upgrading to newly-released gadgets

How to Build an Emergency Fund

An emergency fund gets you through tough times and gives you the confidence to withstand any storm. Here are some ideas for creating an emergency fund.

• Set up a budget. As with anything, make a budget first. This assists you in better money management and identifying areas where you may reduce your spending. Start by making a list of all your monthly costs and revenue. Give as much information as you can. After that, group your expenditures into needs and wants. Decide how much you can spend in each category, and then lock that amount in. Make a commitment and follow through each month.
• Choose a monthly saving target. This is the sum of money you should aim to accumulate each month for your emergency fund. It can be challenging to set aside a portion of your paycheck each month if you have a single income or are currently making just enough to get by. Due to this, budgeting is essential. A large sum each month can be challenging, but smaller sums are doable. Simply persevere and remain consistent. It won’t be long before you arrive.
• Adjust as necessary. A lot may happen in a short period of time. You might receive a highly sought-after promotion, find freelancing work, discover that your spending is lower than anticipated, etc. Make it a point to periodically check your budget to determine what is and is not working for you. If there are ways for you to increase your savings so that you can meet your emergency fund target more quickly, take them.

Build Emergency Funds with Long-term Mutual Fund Investing Today!

With mutual fund investing, you can build and protect your emergency fund assets. Investing in mutual funds for your future and any unexpected occurrences is now more straightforward with plenty of options to choose from including:

• Growth-oriented Equity Fund for Optimal Capital Gain
• Income-oriented Bond Fund for Capital Preservation and Regular Income Stream Policy
• Growth and Income-oriented Balanced Fund for Maximum Dollar Income Potential

Forget about the fear of being unable to live life comfortably when such unexpected events transpire by building your emergency funds through mutual fund investments in the Philippines.