An emergency savings fund is something many people talk about, but very few people actually implement. Think about what would happen if you lost your job overnight, had an accident or were unable to work for a period of weeks or months due to an illness? If you don’t have one, read on to find out why everyone needs an emergency savings fund, including you!
Why Do I Need An Emergency Savings Fund?
Life is full of surprises. And not always nice ones at that. No-one likes to think about worst case scenarios, but isn’t it better to be prepared than to be left floundering, especially when it comes to your finances?
They say money can’t buy you happiness, but it can buy you financial stability and freedom.
Having an emergency savings fund means that should something unexpected happen that causes a significant loss of your regular income, you won’t have the added stress of potentially not being able to meet your debts or worrying about where your next meal will come from.
How Do I Set Up An Emergency Savings Fund?
It’s super simple. Create a new bank account and call it your ‘Emergency’ account. Then start putting money into it every time you get paid. Don’t wait and see what’s left at the end of each month – because there won’t be anything. Take it out of your wages or earnings immediately when you get paid and start that fund today.
How Much Should I Be Putting Into My Emergency Savings Fund?
As a general guide, you can look at your income protection insurance and see what the waiting period is before you can submit a claim. If the waiting period is 3 months, look to have at least 3-4 months’ worth of expenses saved in your emergency fund.
Most financial experts recommend 3-6 months’ worth of expenses be saved up in your emergency savings fund. This will give you a few months of breathing space where you don’t have to worry constantly about being able to pay your bills or feed your family.
What Counts As An Emergency?
The next thing you need to determine is what counts as an emergency. This will set clear and firm boundaries to ensure you don’t fritter away your emergency savings fund on frivolous things.
Having the latest Chanel handbag or Ping golf clubs DOES NOT count as an emergency. Making your mortgage repayment after being made redundant DOES count as an emergency.
If you need help planning for an emergency expense, speak to our financial planners in Joondalup today. We can help you breakdown your monthly budget and help you get on top of your incomings, your outgoings and your savings plans.
Call us on 08 9300 2553 or contact us online today.