Sunday, January 24, 2021

Emergency Fund

What is Emergency Fund? Emergency Fund (EF) or Contingent Fund simply means that you have money saved that you can use in case of  unforeseen events in life (can be a matter of life and dead situation).

Ex. lost of job and immediate medical needs (note: wanting to buy a new car or bag is not an emergency situation)

Ideally, EF should be equivalent to 3, 6 or 12 months of your total monthly expense. For a starter, just prepare 3 months. If your monthly expenses is P10,000/month then multiply it by 3 months, gives a yield of P30,000 (Ex. P 10,000 x 3 = P30,000). For 6 months worth, it should be P60,000 and P120,000 for 12 months Emergency Fund.

Since you cannot touch this EF, it is best that you put this to a high yielding account that you can still withdraw anytime that you want it without any penalties. Ex. Bank Time Deposit or Special Saving accounts.

Next Topic: Make More Money or Live Within Your Means.


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