How to setup an emergency fund
It is important as part of your monthly savings strategy to set aside a specific amount to build up an emergency fund. Life is full of the unexpected, and it’s the unexpected that causes the most damage to personal finance.
An unexpected medical cost, losing your job, a sharemarket crash, interest rate rises, the list goes on. Any number of events can have a significant impact on our personal finance goals. It is therefore imperative to have an emergency fund.
How to create an emergency fund:
- Decide on an amount that you would like to grow your emergency fund to. 6 months of wages is often a good starting point.
- Work out how much you need to set aside each week/month to achieve this goal using a savings calculator.
- ‘Pay yourself first’ to ensure you prioritise your emergency fund savings above expenses.
- Ensure your emergency fund money is in a risk adverse account such as a bank savings account.