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| 7+ Tips for Saving Emergency Funds That Are Never Failed According to Experts |
Understanding tips for saving emergency funds is one part and an important step in personal financial planning. The goal is to create financial stability and security (financial foundation) in facing unexpected situations that may occur in your life.
What is the right way to save emergency funds? How to prepare emergency funds? Where to store emergency funds? How much emergency funds are needed? Come on, see the full explanation in this article!
7+ Tips for Saving Emergency Funds
An emergency fund is an amount of funds or money that is specifically saved (separately) to deal with emergencies or unexpected situations that require urgent costs.
The purpose of an emergency fund is to provide financial protection and peace of mind in the face of unexpected events, such as job loss or layoffs, job rotations and transfers, sudden medical expenses (outpatient care), or urgent repairs.
1. Instill the Mindset of the Importance of Saving Emergency Funds
Emergency funds are very important Friends to have as financial protection and peace of mind in the face of unexpected events.
Imagine if you don't have an emergency fund, what will happen when the unexpected event comes? Yes, usually people will borrow funds/money from relatives, colleagues, friends or even the bank. It's a different story if you have started saving for an emergency fund. You can use the funds for urgent events.
A real example of an emergency fund is during the Covid-19 pandemic, many people lost their income. Like it or not, the person had to live off the emergency fund.
Remember! Emergency funds should only be used for unavoidable emergencies, not for less urgent desires or needs.
2. Check Financial Condition
Check your personal financial condition by checking your financial health. You can use the financial planning calculator available on the website or application.
Hopefully, after you check your financial condition, you will know:
- Is your current financial condition healthy or still unhealthy?
- What are the things that still need to be improved?
- Can you achieve your financial goals with your current financial capabilities?
- Do you need to increase your income?
3. Set a Financial Budget
Set your monthly budget that includes your regular monthly income and expenses.
If necessary, save on expenses for a special allocation of emergency funds. You can review your spending habits and look for opportunities to reduce unnecessary expenses. That way, you can have the opportunity to save for a larger emergency fund every month.
4. Calculate the Amount of Emergency Funds Needed
Determine the amount of emergency funds you need to prepare. Ideally, the amount of emergency funds is around 6-12 times your monthly income.
- If you are still single, the emergency funds needed are 6 times your monthly income.
- If you are married, the emergency funds needed are 9 times your monthly income.
- If you already have children (1 child, 2 children, and any number), the emergency funds needed are still 12 times your monthly income.