A trusty emergency fund, as opposed to a savings account with a specific purpose such as a vacation trip, mortgage payoff, or business capital, keeps you afloat in the event of an unexpected financial setback.
This is where you will get your money if you lose your job, become ill, or suffer a natural disaster. It can also serve as a savings account, provided you do not need to use much of it in the coming years. You can easily take a portion of the emergency fund and invest it in higher-yielding investments.
It is never too late to begin saving, regardless of your age. This timeline will assist you in charting your course toward establishing a contingency fund.
Sean Martin D. Plantado, head of Digido.ph Customer Care, notes that no matter what kind of emergency happens, it’s vital to have financial plans. And having an emergency fund should be a top priority because it serves as the backbone of your personal finances.
Start small in your 20s
Begin early and slow but consistent. This is the most appropriate time to lay the groundwork for setting up excellent financial habits and intact savings.
Due to a minimal salary and overwhelming monthly bills, you may believe it is too difficult to save money right now but the truth is that it will be much more difficult to save when you are older, married, and have children to care for.
There are many challenges that you will be facing especially in terms of your career so the best way to prepare is to have a contingency fund in place to fall back on.
Get rid of your excuses and begin small. Open a bank account and deposit at least P500 every time you get your salary to begin building your savings.
An automated savings account could be helpful as it aids in the practice of the “save first, spend later” mentality. People around this age tend to refuse to think about their savings and just relax.
However, if you have this kind of attitude, you will surely be burdened in the long run since you have to tighten your budget later on. Thus, the twenties is the best time to save and earn more money.
Be wearier of your finances in your 30s
By the time you reach this age, you may find yourself juggling a lot of financial responsibilities, such as purchasing your own home, getting promoted in your career, and even having children.
Because your thirties can be a time of significant financial change, you will want to be mindful of how you spend and save money.
Start by looking at your bigger goals and select a few to focus on. Assume you want to buy a house. Begin by calculating how much money you will need to set aside each month to meet each goal by the deadline, then take a look at your bills.
Examining your expenses will allow you to determine where you are overspending. You may need to cut back on these expenses in order to stay on track to meet your goals.
You must also always stick to your savings plan. You can lower your credit card interest rates, save money from tax refunds, and set a deadline for when you will be able to pay off your debt.
Debt consolidation enables you to stretch your income and concentrate on effectively managing your finances. Your goal must be set to have emergency savings that can cover at least six months’ worth of expenses.
Prepare for retirement in your 40s
If you were successfully able to follow through on your emergency savings throughout these years, at this point, you must focus on building your emergency fund for your retirement. This is the right time to start saving for retirement or you would not have enough if you start too late.
You can double your emergency savings if you sell unneeded assets. Examine your investments for risks and ensure you have adequate coverage for medical and retirement expenses.
Moreover, designate a beneficiary for your emergency fund so that in case of an emergency, they will be able to access and use your funds. This could also go toward your children’s college expenses.
Continue the habit that has allowed you to save more money over time, and you will have your finances under control. Saving money could really be challenging. However, this habit stems from a desire to stay ahead of your finances, to be prepared, and to avoid debts and emergency loans at all costs.
