Emergency fund is the ready cash you have saved up for a long period of time in case of an unexpected expense like job loss or medical emergencies. With an emergency fund, you will feel more financially secure and less stressful.

Now the problem is, how to build an emergency fund?

1. Set a savings goal

Your emergency fund should hold at least 6 months worth of monthly expenses, but many people have no idea how to even start. Don’t worry, we have got your back. Check out this example:

Assume you are earning RM 3,000 every month, then your emergency fund should be RM 18,000 (RM 3,000 x 6).

Likewise, for those earning RM 5,000, RM 10,000 or even RM 20,000, your emergency fund should be RM 30,000, RM 60,000 and RM 120,000 respectively.

2. Put aside at least 10% of your monthly income

Using the above example, we have to at least set aside a RM 3,000 to our bank account, which is different from the account which our salary is transferred to. And the money in this account has to be withdrawable in case of emergency. 

Photo source: Fundsupermarket

3. Automatic savings plan

Thanks to technology, most banks now provide an E-Standing Instruction service or recurring payment feature that allow an automated fund transfer to another bank account with your permission.

The start-up of your savings plan is just one click away.

4. Save up your tax refund

Many people tend to spend their tax refund as it is a small amount of money that seems to be an ‘extra gain’. However, many a little makes a mickle. RM 100 or RM 200 may not look much, but when they accumulate, that will be a different story.

5. Use your angpau money

What to do with the angpau money you get during Chinese New Year? Put it into your emergency fund, of course!

Photo source: Military.com

6. Use your bonus money

Bonus money can be stashed up and used as your travel fund when the amount is large enough. You might even able to take your families overseas by then!

7. Delay purchasing

This may be hard, but the mini money you use to buy things you do not really need in fact should go to your emergency fund for future needs.

Source: Sin Chew Daily

Cover photo: Credit Sesame || Family Mint