How To Save Money For An Emergency Fund? In the current pandemic, setting aside money for emergency funds is necessary so that urgent needs can be met. Then, how to calculate and set aside money for emergency funds?
What is an Emergency Fund?
Emergency funds are funds that are set aside or saved so that they can be used to meet urgent needs, such as health costs, education, home repairs, damaged vehicles, or even layoffs. Compared to mutual funds or stocks, emergency funds should be deposited in the form of savings that are liquid, which is easy to take anytime and anywhere when needed.
How to Calculate Emergency Fund
The emergency funds that need to be prepared by each individual are different, depending on the amount spent each month and single or has a family. Here’s how to calculate and set aside money for emergency funds based on 3 categories:
Unmarried Workers
For those of you who are single and have no family, the emergency fund that must be prepared is 3 times the monthly expenses. For example, every month your expenses reach USD 1,100, then doubles by 3 times the monthly expenses so that the total money for the emergency fund that you have to set aside as much as USD 3,300. You can use this emergency fund for 3 months if you off at any time.
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Workers Who Have Families and Do Not Have Children
For those of you who are married, but do not have children, the emergency fund that must be prepared is 6 times the monthly expenses. For example, spending each month reaches a figure of USD 2,000, then double by 6 times the monthly expenditure so that the total emergency fund that must be prepared is USD 12,000.
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Workers Who Have Families and Have Children
Well, for workers who already have a family and have children, the emergency fund that must be prepared is 12 times the monthly expenses. For example, monthly expenses in the family reach USD 4,045, then double by 12 times the monthly expenditure so that the total emergency fund that must be prepared is USD 48,540.
Families who already have children must prepare emergency funds for 12 times the expenditure for the child’s education.
Emergency funds do not need to be added unless there are changes to monthly expenses, such as getting married and having children. If this year’s emergency fund is unused, then there is no need to increase it to 2 times the following year.
Setting up an emergency fund doesn’t have to be done at any one time You can set aside money for the emergency fund within 1-2 years. If emergency funds have been collected, make sure to use them only for urgent needs.
How To Save Money For An Emergency Fund
Given the amount of emergency funds that must be collected, you may be wondering how to reach the target. Here are some steps you can take to make your emergency fund savings realized.
Setting Aside Money to Save At Least 10%
In order to have an emergency fund savings account, the first thing you can do is to save money. Set aside at least 10% of your monthly income to save.
Separate your savings account with your account to make ends meet. That way, you can find out the progress of raising money. This also prevents you from the possibility of using savings money for other things.
Also, try to save at the beginning of the month and do not do so at the end of the month. This is because usually at the end of the month we run out of money to save. Whereas at the beginning of the month, the income we have is still intact.
Use Remaining Money
The next Tips How To Save Money For An Emergency Fund is use remaining money.
After spending monthly, there is usually a little money left, well, do not rush to spend it for unnecessary shopping. It’s a good idea to set aside to put in an emergency fund.
In addition to setting aside the monthly salary, you can also use excess funds from other needs. So that without you knowing the emergency funds can be collected so easily without you feeling depressed.
Therefore, reduce consumptive habits and make it a habit to live simply so that managing emergency funds is not difficult to do. And emphasize to yourself that simple life is not an embarrassing but challenging thing.
Saving Money in Short-Term Investments
Besides saving money, you can also start investing. By making an investment, the money in the emergency fund is collected faster because you can get interest or profit.
By choosing a short-term investment, you can earn a profit within a few months. In addition, these investments have a lower level of risk than long-term investments.
By investing, it is not only the need for funds for emergencies that you can fulfill. Investments can also be used for various financial purposes such as funds to get married, buy a house, or savings for children’s education in the future.
Finding Additional Income
The next Tips How To Save Money For An Emergency Fund is finding additional income.
Do you feel that the monthly salary received is not enough to meet the amount spent? Or do you want to raise emergency funds faster?
If so, you can try to make extra money. You can find a side job or open a business that can be done from home.
By having additional income, you can save more. That way, you can collect emergency funds faster.
Emergency Funds FAQ
What is an Emergency Fund?
An emergency fund is money that is prepared to be withdrawn at any time in an emergency.
What are the Characteristics of Emergency Funds?
Emergency funds have several characteristics, which distinguish with other types of investment, namely 1) specially prepared, stored and not contested; 2) collected from monthly income on a regular basis; 3) money can be disbursed quickly in an emergency.
What It Means ”Specially Prepared, Stored and Not Sued”?
Funds prepared for a particular purpose, then stored securely, are not used for purposes other than in the face of an emergency.
What Does ”Collected from Monthly Income” Mean?
The way to prepare an Emergency Fund is to collect from monthly income on a regular basis to be able to reach the target that has been determined.
Thank you very much for reading Emergency Funds, How to calculate emergency funds, How To Save Money For An Emergency Fund, and Emergency Funds FAQ, hopefully useful.
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