Unexpected chain of events happen almost every day and it can be quite unbearable for some. Getting a retrenchment, losing a rice bowl, sudden piles of medical bills or even unforeseen events such as emergencies. In times of dire situations, how are you going to manage all these overwhelming expenses? Where can you get money from? Are you friends and families going to lend you a huge sum of money? Or have you gone through a licensed money lender to take up a personal loan to clear off what you’re facing right now?

Issue arises, even if you do not wish to deal with them as this is inevitable in life. Life’s good if you already have a set of emergency funds set aside. However, not many have the abilities and capabilities to save up enough money when emergency arises. Besides, getting a loan will help you not to foot the bills, but also able to meet ends meet and take care of the family. As such, this is to ensure that you are capable to lead the life you are accustomed to, during this tough period of time, for some reasons you are unable to work due to sickness or other reasons. So, what is an emergency fund and why do you need one, and how do you build it up? These are a few of the areas we will touch on as you read through this post, if you are concerned for your family in such a situation.

Why you need these funds?

In terms of 50-30-20 rules, you are expected to have an emergency fund set aside, and it should be for about six months worth of your monthly salary. If you have an unexpected surgery or medical bills, thankfully that most Singaporeans are able to use MediShield and MediSave and only expected to come up with a small sum of cash payment. However, what if you do not fall under this category? Where are you going to get this sum of money? How are you going to pay the lump sum of bills and take care of your family?

There could be a couple of reasons that you should be setting up an emergency account. Because nobody can foreseen when will emergency arise so therefore it is necessary to start saving up and get these funds prepare in advanced. Neither do we plan for these emergencies nor do we want them to occur. However, life is unpredictable and yes they do happen at times. When you have a set amount of money set aside, you at least know you are going to be able to cover the costs which are tied to the emergency. Hence, there is one less thing for you to worry about. While you have to go for job hunting, well at least the personal loan amount are able to hold up your household expenses. Emergency funds should be stocked up with at least six months of income. It is not easy but it is essential.

How much is considered enough?

Well, it differs accordingly to different households capabilities. First of all, you will have to have a fixed monthly stream of income. Then you make sure that you split your salary in terms of 50-30-20 rules, it will ensure that you have a regular stream of fixed salary each month in order to achieve the results in months to come.

In addition to your fixed income, you also want to account for any variable income that you can get from side jobs. This can be any investment or other saving sources you have been receiving routinely. If you have these stream of funds coming in on a regular basis, you are going to want to account for this as well when you are developing your emergency funds and as you are planning how much is enough for you to store away, in the funds or account you are setting up. Besides, you have to cater in this factor of all streams of income as you plan accordingly.

Start building your fund

Saving up is never easy. You will have to give up on your social life, your shopping habits, or what money spending habits that you have. But you know desperate times are more important than these factors so in a way you should force yourself to do so. As such, there are a number of ways that one can go about doing this as well. For instance, you can special set aside a small amount of your pay check and start putting them into the funds. Bit by bit will go a long way, it will add up over time and it is a good means to force yourself to understand the importance of savings. Then you will start planning for your future and perhaps even your retirement plans. In times to come, you will slowly grasp that the amount of money you have been “throwing” away and spending on unnecessary materialistic items and you will thank yourself in future.

Otherwise, you can try getting a side job. Not sure if you are legally allowed to take up a side job (you may wish to discuss with your current employer, maybe they will give a leeway knowing your current financial status). Even if this side job doesn’t pay you well and you will only get a small amount each month, it is okay, at least you still have a small stream of additional income coming through.

In Conclusion

Every family has their own struggles. Some have it easy, some may not. Every one is taking up a different route in hoping to achieve the same objective. Hence, planning is very important. There is a saying, “if you fail to plan, you plan to fail”, so in order to avoid this, you have to diligent in planning your own emergency fundings before it is too late. Nobody expects emergency to happen at any point of time. It is unavoidable and frankly speaking, most people shun away when you approach them for money. Truth hurts but nobody is there when you need any monetary help. So it is always good to depend on yourself. Don’t wait till things arise then you start to panic. It is never too late to start working on this so get going!