When you have to pay for an unpredictable stuff, it will be less demanding if you an emergency fund. Especially, during this coronavirus pandemic, this fund is much more necessary than ever.
Emergency fund, as the name suggests, is a fund specialized to cover any urgent needs at an unpredictable moment. Considering its nature, this fund should be an integral part of every person’s finances.
Despite everything, many people do not really know how to establish their emergency funds the right way, let alone the amount they have to save at first. A study in the US suggests the issue and we can assume that the same problem perhaps also happen throughout the world.
For that reason, to be able to build the right one, here are the ways to establish an emergency fund.
Also Read: A Late Start for the Retirement Savings
How to Start the Emergency Fund
Accordingly, a good emergency fund should has its own saving account. Therefore, starting from now on, we can begin to think that this fund is a saving.
The trick to this saving is you should save first rather than save later. Upon receiving your income, you should allocate a particular percentage of it to save for urgent needs only.
The Minimum Amount that You Should Have
A rule of thumb would suggest that the minimum amount that you must possess should equal your 3 to 6 months of expenses. That said, from the little percentages you start to save every month, it should be equivalent with the aforesaid.
In other words, you need months to have your emergency fund ready. For instance, you spend a total of US$5,000 in 3 months. Also, you can only save as much as US$500 per month. Thus, you need at the very least 10 months to make your fund ready.
Also Read: Do You have Sufficient Emergency Funds during Coronavirus Pandemic?
