Emergency funds are funds that you set aside for emergencies that cannot be predicted. These funds are intended to be used only in the worst conditions. For example, when you and your family suddenly get seriously ill, repair or renovate a house, repair a car after an accident, and others.
Emergency funds can usually be saved in a savings account. However, you must ensure that these funds can be accessed and retrieved quickly. According to Investopedia, financial planners recommend that emergency funds should typically have three to six months’ worth of expenses in the form of highly liquid assets. Besides, collecting emergency funds requires discipline because not everyone can consistently collect it.
Let’s Check Out Four Steps to Start Collecting Emergency Funds:
Start with Small Steps
For some people, raising emergency funds is only a difficult dream to realize. Especially, when your income runs out for various installments, bills, and other household needs.
Therefore, you need to find out how to start an emergency fund with small goals and gradually achieve your long-term goals.
You must reduce the frustration and risk of losing your motivation to save emergency funds by setting targets for achievement that you must complete.
For example, you can start by setting aside 5% of your salary each month for emergency funds.
Select a Place to Save it
When you start an emergency fund, the goal is to have quick and easy access to your money if you need it at any time.
Therefore, you should consider storing it in a savings account that you can access at any time.
Besides, you must separate the emergency fund from your daily needs. By storing it in a separate bank, it will reduce the temptation to take it when you check your account.
Set Aside Immediately
When you get a salary from a company, you must immediately set aside your money to save your emergency funds. You can set an automatic deposit on payday as part of the steps to start an emergency fund.
After you start the emergency fund, find other creative ways to immediately raise the emergency fund to the target faster. For example, you can look for side jobs that are related to your hobby.
Keep Collecting
It is important to remember that you must continue to collect emergency funds even though you have reached the target. Your situation can change at any time and you cannot predict it.
To be more eager to collect emergency funds, you can treat emergency funds such as a type of insurance policy for you and your family.
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