You know that you need an emergency fund; for some, if an emergency such as job loss does occur, the first thing they do is going to a family member or to a money lender. But, this does not have to be, nor should it be, the case with you. You are here, so you at least know you have to set funds aside in the event of an emergency. But, how much is enough, and how much should you plan to save on a month to month basis in order to ensure you do have the funds you need set aside? Here we are going to take a look at emergency funds, how long you need to have funds set aside for, and how much it is that you should really have in an account so that you can take care of both yourself, and your family, if an emergency does ensue.
What is it?
An emergency fund is just what it sounds like. If you lose your job, if you are injured, need surgery, or if you can’t find work for some time, it is basically funds you have set aside for such emergencies. Although most Singaporeans are able to use MediShield and MediSave to cover up some of the bills, but it may not be enough. You know they happen and you do not plan for them to happen. And, what is worst, is that they come without notice, and they come at the most inopportune times. But, guess what? This is the case with all people, and it is something you simply can’t stop from happening. So, rather than cry or worry about it , it is much better for you to have the funds set aside and to have an amount of money set aside for the emergencies which are going to happen. It is part of life, and there is no way for you to get around it. So, you should have funds set aside in the event something does happen and you are not able to work for a set period of time. You will know you have the funds to pay your bills for the set period of time which you have saved for.
How much do you need?
Now you know you have the account but how much has to be in the account. For one family the answer is going to be different than for the next. So, a good rule of thumb is for you to have a minimum of six months set aside, based upon your monthly expenditures. This means if you spend $2K a month, you need to have a minimum o $12K set aside for the emergencies. You know you are going to be able to pay your bills and live your life for a period of six months. This is usually enough time to get things back in order, or to find a new job in the event you have lost your job. If you are hurt, and have a great health plan in place, in addition to the emergency fund, this is even better. Not only do you know you are going to have the money you need when you can’t work, but you also know you are not going to incur huge medical bills and expenses, as they are going to be covered by the insurance policy that you have in place. Although six months doesn’t seem like much, the funds are going to go. So, you have to make sure you do have the funds allocated, set aside, and that you have enough to pay your bills and expenditures on a monthly basis, until the emergency expires.
Do not forget to budget everything into the monthly expenditure as you are setting up the emergency fund. Not only the coffee you buy each morning, but all bills, and everything you have to pay each month should be allocated to the funds. You need to make sure you know exactly what is coming in and what is going out. This is the only sure way to know you are going to have the funds,that you are going to be able to pay what you owe, and are going to be able to take care of your family as well.
If you are not sure what you spend, or where your money is going, make sure you plan now, do not wait until things go awry. Doing this in advance, and planning in advance, is going to make it far easier for you to begin saving. It is also going to make it a stress free time. It will allow you to deal with the emergency , and not have to worry about where you are going to find funds from. The last thing you want to do when you are dealing with an emergency is to add more stress to the situation you are in. So, make sure you do your planning in advance and that you know exactly what is being spent. You are going to find that this will help you, it will help your family, and it is going to allow you to worry about things that really matter, and getting out of the emergency you are in, in a shorter period of time.
You know things go wrong, and that there simply is no way for you to plan for everything. But, there is a way for you to prepare for when things go wrong and the emergency account is the sure fire way for you to do just that. So, if you are dealing with financial distress, or if you simply want to avoid it, you can start to plan for the future, and you can have the funds you need, if and when something does go wrong.
When it comes to taking care of a family you have to do everything possible for them. With the funds you allocate to your emergency funds, you can do this. At least for a period of six months, you know things are going to be properly tended to, even if you can’t work and aren’t earning for a set period of time.