4 Tips On Building Up an Emergency Fund

4 Tips On Building Up an Emergency Fund

Do you have any emergency fund which is ready and could be utilized anytime needed? Nope, emergency fund is not our credit card. The interest is far too high for it to become an emergency fund and it will just cause the whole situation to become worse. Usually. people say at minimum, 3 months of salary amount should be kept in the bank as our emergency fund. Some however declared that 6 months would be a better number since 3 months may not be enough to find a new job.

According to Wikipedia, “An emergency fund is a financial safety net for future mishaps and/or unexpected expenses.

Emergency funds should typically have three to six months’ worth of expenses, although the 2020 economic crisis and lockdown has led some experts to suggest up to one year’s worth.” Source: Wikipedia.com

How do we start our emergency savings?

#1 – Automate your savings. If one does not automate this and rely on manual intervention, chances are after a while, it will be forgotten and that’s the end of the road for emergency funds. Once automated, we do not need to remember and truth is, we will start spending less simply because our account does not have the amount for us to continue spending.

#2 – Did your company declare bonus this year? Did you receive a lot of angpows? If you have bonus, please SAVE the bonus. In fact any financial windfalls we receive should be quickly put into the bank versus spending it and then complain why we do not have the housing. This is one way our savings can suddenly increase faster than most other countries.

#3 – Put into the FD so that you would not touch the money. when you get it. That’s the whole point yeah and not transfer to Account 3. Once transferred, how long do you think the money can last inside your account. Anyway, it’s their money. FD is a super safe investment. At the moment, we also have potential finance studio there’s not even potential crisis etc. Well, 3 percent per year seems to be good.

#4 – Perhaps invest into REITs?

Here are some of them: Benefits of investing into REITs. It’s safer, it’s very liquid and it gives good returns year after year if the mall they are owning does well every year. If you need money you just need to sell the REITs like how you sell the shares too.

#5 – Reduce Expenses, tremendously

Enough lah. Why do we change handphones when ours are working just fine. Why must be buy the latest smartphone model every year? Why must we always eat in air-conditioned restaurant? What’s so hard about eating in a local kopi tiam? Truth is, one Starbucks every other day is equivalent to 182 cups per year. One cup of Starbucks every day, my savings just from this is roughly as follows:

182 cups x RM10 (americano) = RM1,820

If we did not spend this amount, it would have become RM18,200

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