HOW TO BUILD AN EMERGENCY FUND

Emergency fund is basically a stash of many set aside for emergency uses such as job loss, medical emergencies and change in income.

Why do I need an emergency fund?

An emergency fund allows you to live comfortably for a few months after unexpected emergencies, unforeseen circumstances or major financial change strike. It is a fund that you can use to keep you afloat and still meet your basic necessities even without a job. If you have monthly dues such as amortization, electricity bills and insurance premiums – these items needs to be paid regardless of your employee status to continue reaping the benefits. You can use your emergency fund to sustain payment for these items while you are still looking for a new job or recovering from a medical situation.

What an emergency fund IS NOT

Emergency fund is not the same as savings. It should not be considered as a short term or long term savings plan such as payment for car, vacation, new gadgets, beauty treatments and even business investments.

How much should I save?

Financial experts recommend to save at least 3 to 6 months of your monthly expenses.

Where shall I put my emergency fund?

The ideal place to store your emergency fund is at another bank account separate from your savings. It shall be liquid (easy to get) in case of emergencies all the while earning interest. Compare the interest rate each bank offers. Some banks even has insurance coverage as perks for opening an account with them.

Here is how you get started:

1. Set a goal

Set a specific amount and target date to complete saving for the emergency fund as well as your chosen bank account. For example: P360,000 by December 2022 to deposit at Security Bank.

2. Set aside 10% per payday

Before you start any spending, put the 10% of your income to emergency savings fund. You can increase the percentage as high as you can. The bigger the percentage, the faster you will reach your goal.

3. Keep loose change

As little as they may seem, loose change are still money. You will be surprised how much you can accumulate in a year saving them. You can also set a specific goal such as: all 10 peso coins you receive in the year 2022 will automatically go to emergency savings fund.

4. Declutter and sell

Purge your house from time to time and sell a bunch of your unused stuffs lying around. Keep the proceeds and add it to your emergency fund!

5. Start some side hustle

If you are good with baking stuffs, turn that hobby into side hustle for the time being. An additional source of income will make you achieve your goal faster without taking too much percentage from your primary source of income. Withs side hustle, you can save for your emergency fund while still living comfortably.

6. Shop cheap on groceries

Choose cheaper brands when shopping for groceries, at least while you are saving for your emergency fund. Unlike mortgage or insurance premiums where payment are fixed, grocery shopping is very variable and can go cheap and expensive from time to time. Cut grocery expenses by choosing underrated brands and skip the unnecessary items for a while.

7. DIY or make your own

In real life, the things that sometimes ruin your budget are events and parties that you need to attend to. You have to shell out money for transportation, clothing and even hotel accommodation. On top of that, your own party too! As you go along saving for your emergency fund, these events are unavoidable (but fun!). You can always try DIY or make your own with whatever resources you have or any skills you master to lessen the party expenses. Try to DIY your party decorations, make your own gifts such as candles, soaps, canvas art, and many more – Pinterest is your best friend!

8. Make cuts

Cut back on unnecessary expenses while you are saving for emergency fund. These includes unused gym membership, in-app purchases, subscription that you seldom use (Netflix or Spotify), purchased books you don’t have time to read and many other things you knew beforehand you can’t commit to attend.

9. Meal prep

The more money you save from making your own food, the more it will make you achieve your goals faster. Take meal prep for example. It is a process of preparing food ahead of schedule. It will not only save you money but it will free you from cooking meals daily (if you cook on weekends for the next week’ consumption). Saving emergency fund while having a lot of free time is already a deal breaker.

10. Frugal living

Evaluate your lifestyle and make necessary adjustments to achieve your goal sooner. If finding another source of income is not yet possible, you have another option to build your emergency fund by saving what you can from your everyday expenses. Try switching off your air conditioning when you are alone to save bills, buy secondhand, aim for zero waste, try couponing, reuse and recycle, avoid eating out or just simply do a no-spend challenge!

Lifestyle change is never easy. It takes a lot of conscious effort to maintain a frugal lifestyle. The good thing is – if you have a goal, you have the fuel to continue whatever it takes.


IMPORTANT NOTE: The rates, contact details and other information indicated in this post are accurate from the time of writing but may change without trishaspan.com’s notice.

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