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How To Start An Emergency Fund

For when life happens.
PHOTO: Pixabay

Maybe you’re underpaid, or maybe you’ve splurged too much this month. Each financial struggle is different, but one thing we know for sure is that emergencies—a flat tire, a broken bone, a death in the family—can happen to anyone.

Are you prepared?

According to financial consultant Randell Tiongson, we are not—Filipinos aren’t saving enough. “[The] average consumers’ savings in China, Singapore, Thailand, and Malaysia are higher at about 30% [of their monthly income]. That compares to the average savings of Filipino households that don’t even reach 10%.” As a result, debt is one of our biggest problems because utang lang tayo nang utang. We do this without worrying about paying it back.


Having an emergency fund that you can dip into when life starts swinging is not only responsible but also necessary.

1. Change your mindset

Yes, family and friends will always be there. But as you get older, they become more like an emotional support system. You’re an adult. It’s time to stop relying on other people to rescue you and start holding yourself accountable.

Also, tweak what an “emergency” means to you. An emergency isn’t a new makeup palette because you accidentally broke yours. It also isn’t about taking a cab just because it’s raining. You can certainly spend on these things but you need to get that from your income, not your emergency fund.  

2. Map out your monthly expenses.

Figure out your fixed and variable expenses. Fixed expenses are the things you pay for every month that are pretty consistent (rent, phone bill, electricity, water, groceries, etc). Variable expenses are what you essentially treat yourself with—yeah, we’re referring to your daily Caramel Macchiato from Starbucks. Think about it this way: Assuming you’re getting that at its cheapest (P150) and only Monday to Friday, that’s still P750 a week, P3,000 a month, and P36,000 a year. Decide how much of your variable expenses you can dedicate to your emergency fund.

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3. Set up a separate bank account.

Set up an account that can’t be easily accessed with your debit card. If you can, set up an automatic transfer from your everyday account to your emergency bank account so you won’t even see it there. Remember: If you can’t see it, you won’t feel the urge to spend it.

4. Focus on small milestones.

Crash diets never work long-term. The same can be said about saving money. Smaller increments will make it less likely for you to fall off the bandwagon. It also won’t feel like you’re depriving yourself of that money.

5. Lucky number 6!

An ideal emergency fund is 6 months’ worth of income. So if you’re making P12,000 a month, you should grow your emergency fund to P72,000. Figure out the right cushion for your lifestyle. Realistically, it’ll take some time to get there, but once you reach your goal amount, life feels infinitely easier. If you do take out money for an emergency, treat it as taking a short term loan from yourself that you will need to pay back!

Tama na ang "Living on a Prayer," before payday, Cosmo girls! 

Source: Investopedia, MoneySmart.ph.

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