Finance
TOP TIPS ON SAVING FOR EMERGENCIES
F
inancial advisors always tell
us to ensure that we have an
emergency fund. This is not
the same as the money you
are putting aside for retirement, a new
home, a holiday or a big purchase.
It is a sum of money you keep in a
relatively easy to access account, that
you use when the unexpected occurs.
As expats the need for an emergency
fund is even greater, becaus e living
abroad may mean that we have no one
to call when there is an emergency.
How many of us can truthfully say that
we have a fully funded emergency
fund? A fully funded emergency fund is
savings, which should be able to cover
three to six months essential living
expenses.
This money comes in handy if there
is job loss or for us expats, when we
have to rush home at the drop of a
hat. Having to pull money from savings
set aside for other purposes during
an emergency, will certainly set you
back financially. What’s even worse is
if you have to use a credit card to take
care of an emergency, as it can lead to
long term debt, especially if you were
already stretched financially. Below
are some top tips to help you start or
improve your emergency fund.
Acknowledge that
emergencies are inevitable
There is no denying it, emergencies
are a sure thing. Many people tend to
believe that bad things only happen to
other people or that when things go
wrong they will then be able to find a
way to deal with it. This is a silly way
of thinking and a careless way to live.
There is one thing that we can be sure
of and that is, emergencies will always
occur. We may not know when or how,
hence why it is important to prepare
financially. Recently there has been a
lot of talk about the use of ‘Go Fund
me’ and other crowd funding sites
during family emergencies. These
sites are good and serve a purpose,
but there is no guarantee that enough
funds will be raised in time to help
with the emergency. It’s not advisable
to count on crowd funding as a good
alternative to a healthy emergency
fund. Define what constitutes an
emergency
Automate your emergency
fund savings It is important to know that some
things become emergencies because
of either poor planning or simply
because you have access to some
disposable funds. For example, if
you should have serviced your car
but neglected to do so and it then
runs out of oil and the engine breaks
down, then the engine not working
was caused by carelessness. If you
simply get tired of the rims on your car
and would like to change them, then
this is certainly not an emergency and
should not be treated as one. If you do
not have an emergency fund, the best
time to start saving for one is now.
Find a way to have money taken out of
each of your pay cheques automatically
for your emergency fund. A good way
to do this, is to open an instant access
savings account with your bank and
set up a standing order to transfer a
set amount from your current account
each month. Do not take a debit card
for this account, make sure you have to
physically go into a branch of the bank
for withdrawal. If the account is too
easy to access you may find any excuse
to take money out of it.
Not everything that crops up is an
emergency, so you have to be very
careful to define what an emergency
means, before you take money out
and start spending. Here are three
questions to ask yourself before
withdrawing from your emergency
fund;
1. Is it unforeseen?
2. Is it essential?
3. Is it urgent?