IN AN EMERGENCY, USE AN EMERGENCY FUND
If there’s one thing this period has taught us is that nothing is certain…especially one’s income. That’s why an emergency fund is absolutely essential. Even when there are two people in a household earning, it doesn’t mean everything’s going to be alright. A pandemic such as this affects not just one person, but all people.
In the event of the unexpected, money that has been set aside, and gaining interest, will provide some respite in times of illness or uncertainty – for all your family.
WHAT IS AN EMERGENCY FUND?
Well, it’s a financial cushion. Money to give you peace of mind for a certain period of time. How long? That’s up to you. The longer you save, the longer you can depend on it. Saving is made easier with an emergency fund because you can’t use that money unless you absolutely have to. For example, when you’re in between jobs or for a medical emergency or any other unforeseen events.
IS IT LIKE INSURANCE?
No, because there are no claims to fill in and insurance only covers specific cases. An emergency fund can be used for an emergency that’s on your terms.
HOW MUCH SHOULD YOU SAVE?
There is no ‘right’ amount. An emergency can happen in a second, and last for months. The only right thing to do is to save as much as possible - anything from 6 months to a year’s worth of living expenses is ideal.
START AN EMERGENCY FUND IN 5 STEPS.
- Write down how much your family spends on essentials each month.
- Create a budget that will help you during a 6–12-month emergency.
- Start saving towards that budget.
- Start small, but add to those savings when you can.
- Do not use that money, unless it’s for an emergency.
WHERE SHOULD I PUT IT?
Because an emergency can strike at any time, having quick access is crucial. If you hold the money in a savings account like the Standard Chartered XtraSaver Account, your money will be safe, can be easily taken out and will continue to grow with returns of up to 1.5% interest p.a. A Shariah-compliant option is also available.