Building an Emergency Fund

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.

Image for illustrative purpose only.

Read more: Why Every Singaporean Needs an Emergency Fund – And How You Can Build Yours

2 thoughts on “Building an Emergency Fund

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Create your website at WordPress.com
Get started
%d bloggers like this: