Having an emergency fund to fall back on is always important, especially when you don’t know how hard a rainy day can hit you.
Luckily, some financial rules can help you figure how much to save. But knowing exactly how large of a pool you’ll need depends entirely on your circumstances.
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You might’ve heard of the popular rule of thumb for how much emergency savings you should have. Most financial consultants and experts recommend that you have 3-6 months of expenses saved for emergencies. That’s a pretty large range.
In general, having 3-4 months of your expenses saved might suffice for you if you’re debt-free, have a low cost of living, have a stable job, and have no dependents. Better still, if you’ve got a partner that you might be able to rely on for financial assistance. In certain scenarios, you might need a larger emergency fund.
Certain scenarios might warrant a larger pool of emergency savings from you. This involves having 6 months or more of expenses in savings.
Do you think it would be difficult for you to find a new job if you lose your current one? Or perhaps you’re a freelancer whose workload can vary seasonally. These are both risky positions to be in.
What about dependents? Have you got children, parents, or a stay-at-home spouse to help support? Don’t forget that even pets are counted as dependents. An additional consideration is if you or your dependents have got medical conditions, or are exposed to high-risk activities (like travelling often).
If so, it might be wise to work towards having 6 months of expenses in savings. As you begin to save this larger amount of money, you can rely on a legal moneylender to expand your financial support network.
As the potential risks in your life increase, so should the size of your emergency fund.
If you’ve got a very high income or a specialised job, it means that you might take longer to replace your job if you were to lose it.
In other cases, you might also have a larger number of dependents to support.
Perhaps you’re nearing retirement or are already retired? Then it might be a good idea to start taking the steps towards funding a year’s worth of savings in emergency funds.
It’s understandable if you think you’ll never be able to save the amount that you need for emergencies. While emergency servings are meant to tide you through worst-case scenarios, keep in mind that things like home repairs or a sick pet also count as emergencies. They’re just smaller emergencies. And you’ve likely been dealing with them well!
Start working towards your emergency savings goal slowly with small amounts of money. And remember that making good progress is what’s most important.
For starters, you should set a savings goal and calculate how much a month of expenses is for you, leaving out luxury expenditures that you wouldn’t spend on during emergencies. You could also consider automating your savings by scheduling a recurring deposit to your savings account.
And the best habit you can have is to make use of any and every savings opportunity you have. If you run into some extra money, consider putting it towards your emergency savings before you splurge it on luxury. But it’s okay to give yourself a little treat once in a while.
You don’t need to have your emergency savings ready immediately. But should you need them, you’ll need to have enough money to keep yourself, and your family safe.
As you work towards your emergency savings goal, you can rely on a legal moneylender if you need quick cash. Remember, when you find yourself in a bind and need money to shell out, borrow only from a legal moneylender that’s responsible and trustworthy.
Use Personal Loan Finder to find the best licensed moneylender for your situation. With our list, you can even find a trusted money lender in Singapore for fast cash loans that can be approved on the same day!