What is an emergency fund? How do I build an emergency fund?
Consider an emergency fund of three to six months of your monthly spending to meet sudden events and payments.
In this way, you can stay away from getting into debt when there is a sudden need for money.
However, do not use the money from the funds to meet your normal spending or to meet your financial goals.
Steps in building an emergency fund:
- Work out your total monthly spending, e.g. housing, groceries, transportation, utilities and other debt repayments.
- Decide the number of months of monthly spending you would like to have in your emergency fund.
- Work out your total emergency fund, i.e. total amount of monthly spending in step 1 multiply by the number of months in step 2.
- Put funds into your emergency fund.
Reprinted with permission from BankingInfo (A Consumer Education Programme)
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