Why do you need an Emergency Fund?
An emergency fund is a sum of money set aside for accidents, sudden injury, or an unexpected loss of income. It’s essentially what you keep aside “for a rainy day”.
Unpredictable events can be life-altering as well as expensive, resulting in financial emergencies. An emergency fund gives you the buffer you need to pay out-of-pocket expenses, so you don’t have to turn to loans or credit cards to cover the short-term lack of cash.MoneySmart
How much should you set aside for Emergency savings?
Financial advisors have slightly varying views.
I would recommend 3 to 6 months’ of your income.
This is to provide some cushion should you be retrenched or out of job while you search for a new job or source of income.
You can start by setting aside 10% of your income or $200 monthly via GIRO (or you can do manual transfer) to a second savings account.
Banks like POSB and OCBC facilitate this with their eMySavings account and OCBC Frank account respectively.
Though it can be a better option to have the second savings account with a different bank; you can leave the debit card at home so as to avoid any urge to use it for spending.