How To Start & Build An Emergency Fund

In these uncertain times, we are now seeing the importance of having a savings or why we needed to have saved up for times such as now, or even build an emergency fund - as most people have been let go from their place of employment, or working from home with little finances, as their salary had to be cut, due to the economic downturn and the COVID-19 pandemic.

I have often heard that one needs to set up or build an emergency fund, but never truly had anyone explain the importance of having one, or why it matters, until a few weeks before, I was let go from place of employment in December 2019.

An emergency fund is simply a cash reserve or money that one have set aside for life’s unexpected events or unplanned expenses or financial emergencies. Some common examples include COVID-19 pandemic, recession, home repairs, medical bills, or a loss of income.

No one knows what is going to happen them tomorrow or later on in life. No one wants to ever find themselves been displaced or homeless, without the necessities or something to call their own.

An emergency fund is somewhat a safety net between you and life unexpected events and circumstances, it will not solve all your financial problems but it comes in handy if you suddenly lose your job, recession hits, or even if you want to use it to start your own business - which can carry you through for up to three to six months, depending on how much that you have placed into your emergency fund.

1.) - Make a budget (weekly, fortnightly, monthly) and see where you can start saving money - It is very important for you to create a budget (income, expenses, savings), so that you know how much you have accumulated from your (income, salary, side hustle, bonuses, cash-back, etc.) and how much you have to spend on (rent, groceries/food, personal care, transportation, entertainment, loans, insurance, debt repayment, etc.), so that you can find enough money to put towards savings/emergency fund.

2.) - You can split a portion of your income into a savings account/emergency fund - From your income, salary or side hustle, you can take out a portion and put towards your savings account/emergency fund, whether is weekly, fortnightly or monthly - which you can increase the amount to your savings account/emergency fund, as you go along.

3.) - If you receive a bonus, tax-refund, cash-back or any sort of cash as a gift - I would advise you to place it into your savings account/emergency fund, that way you are giving your emergency fund a boost.

4.) - You will need to decide if you want to o cover at least three to six months of emergency expenses - From your weekly, fortnightly or monthly budget, or even your income, salary, or side hustle, you can calculate how much you will need to put towards your savings account/emergency fund that will cover you for three to six months.

5.) - When you reach that goal, keep saving - This is the amount of money that you want to accumulate for the three to six months. With some discipline, you’ll be surprised and relieved at how quickly your savings can grow if you’re consistent about adding to it and not going into it to withdraw from it. If you want to cover your emergency fund for up to a year, it's all up to you.

With all that said, why not start and build your emergency fund today, than wait and say that you will start it next week or next fortnight or even next month, which might be too late, as life always have twist and turns that can sneak up on you at anytime and unexpected events do occur.