It’s a fact that in life unexpected emergencies happen. To some people, It could be a blown transmission on the car, or even worse, the loss of a job. Whatever the situation might be, how prepared you are can make all the difference in a stressful time.
But among the many things covid has taught us, it’s how a large per cent of Nigerians have no emergency savings.
Unlike your regular savings, taking steps towards starting an emergency fund is your way of giving yourself the security of knowing you can cover unexpected expenses should the need arise.
Think of it as money that’s set aside in a separate account to be used for only emergencies. Managing this account requires lots of discipline since it needs to be used for true emergencies which do not include upgrading your wardrobe.
It may take time to build an emergency fund, but the process doesn’t have to feel stressful or overwhelming. It’s all about having a plan, and these four steps to help guide you:
As financial experts, we usually set a number as a benchmark for emergency funds, anywhere from three to six to 12 months worth of expenses, which is a great point to aspire to. Especially when you have other consistent fees like rent or school fees.
When you start an emergency fund the purpose is to have quick, easy access to your cash. To accomplish this, consider keeping it in a moderate to a high-interest savings account so that you can access it at any time. When considering how to start an emergency fund, think twice before investing in securities, since it will likely take days to unwind any positions to receive the money. Keeping them at a separate bank is advisable to reduce the temptation to draw from them when you’re checking the balance on your other accounts. Remember, out of sight, out of mind—well in this case, until you need them.”
It is important to treat your emergency fund just like a priority payment, Just like a pension fund, it’s important to pay into your emergency fund first.
When you start an emergency fund, set aside a certain percentage of your take-home pay each month and put it straight into your account. Sometimes the excitement from getting paid can make you forget or stall on this, which is why it IS advisable to set an automatic deposit on payday.
It Is important to remember that just because you might have reached your long-term goal to start an emergency fund, you shouldn’t stop there. Circumstances change all the time, through marriage or the birth of a child, things like this can cause your monthly expenses to increase as a result. If that happens, you need to account for it. The six months’ worth of expenses you originally saved may no longer cover you.
By learning how to start an emergency fund now, you can avoid serious financial problems later in the future, one way to take a step towards starting an emergency fund is by creating a savings goal on ALAT and as the months roll by, you’ll find you have peace of mind before you know it.