Every woman needs to have an emergency fund. It’s the truth. In fact, I just have to say it again: every woman needs to have an emergency fund.

It doesn’t matter whether you’re single or married, newly employed or working in the same firm for many years. An emergency fund is not only a good idea but a very smart one.

Let’s define what an emergency fund is, first of all. According to Investopedia, “An emergency fund is an account for funds set aside in case of the event of a personal financial dilemma, such as the loss of a job, a debilitating illness or a major repair to your home.”

It’s easy to understand, it’s the money you tuck away for the unexpected curve balls life sometimes throws at us. It’s a mark of maturity, as well as personal savvy, to realize that in everyone’s life difficult times come. Therefore the best thing to be at that moment is prepared. This is where your emergency fund comes in.

Here’s an important benefit of having such a fund that I’ll tell you about right away. An emergency fund causes you to have the reassurance that no matter what happens, you’ll be all right. You and your family, have a safety net under you until you’re back on your feet.

It will help you sleep better and remove potential anxiety and stress when times get tough.

But wait, isn’t that what insurance is for?

Yes and no, because insurance doesn’t cover everything. And even if you do have insurance policies (and everyone should!) you still need accessible cash for your expenses in the short term.  Yes, this is true even if you’ll eventually be reimbursed you for what you spent on the emergency.

Married women have a joint emergency fund with their husbands since they need to build that fund for the family. But don’t wait until you’re married, ladies because you don’t know when that will happen. Ideally, when you start your first job is the best time to start building your emergency fund.

How much is needed in an emergency fund?

Experts say the fund should be at least 3-6 months’ worth of expenses tucked away for a rainy day. If you’re beginning your career, when your expenses are considerably less, three months is a good place to start. But if you’re older and you already have a family, you’ll want the fund to be bigger.  Try to have six months’ worth of expenses squared away in a separate emergency fund account.

How do I start building up my emergency fund?

As with many things financial, begin with your budget. If you have never made your own budget, here’s a simple but foolproof way to start.

Calculate how much you spend in a month. Grab a cup of tea (or a glass of red wine) and write down your non-essentials for the month. Include everything you spend on housing, food, transportation, utilities and everything else that you need for daily living. If you have kids then you will have to factor in childcare and education expenses.

Pro-tip: add a small percentage on top of the total amount to prepare for inflation and/or miscellaneous needs. In other words, don’t just go for the bare minimum. You want to be comfortable even in times of crisis, not just have a subsistence existence.

When you have that figure, multiply it by three, or six, and you’ll know what’s needed for your emergency fun. Don’t get overwhelmed if the figure feels large! Remember that we all have to start somewhere. Just the fact that you are setting aside money for a rainy day is a sign that you are choosing to be smart about your life.

So now I know how much I need, and then what?

With the total figure in front of your eyes, go back to your budget. Are you following the simple 50-30-20 principle in budgeting? This method has fifty percent of your income going to your needs. Thirty percent goes to to discretionary expenses and twenty percent to savings.

From that twenty per cent, why not allocate half toward your emergency fund until you fill up the amount needed? That’s equivalent to ten per cent of your income. You won’t feel the pinch because your expenses will not be affected. You’ll just be directing your savings toward a specific account for a certain amount of time.

But if you’re saving up for something special, you may not want there to be be a delay in getting it. Go back to your expenses. There’s not a lot you can do with your necessary spending, right? So take a look at your discretionary spending, and see where you can cut corners.

Is it forgoing movie night with the family or friends? Is it brewing your own coffee and bringing it in a commuter cup each morning? You can give up favourite half-caf caramel macchiato with whip cream and three sugars on your way to work. Or maybe you can remove that ride-hailing app from your mobile phone for a while?  This will force you to take the bus or train, rather than booking a Grab to take you places.

Maybe you’ll reach a happy compromise and take five per cent from your discretionary spending. Add this to another five from your savings allocation in order to build up your emergency fund. You do you! Either way, you’re on your way to getting your safety net fully in place. Yay, you!

Final words of wisdom

Keep your emergency fund in a separate account that you’ll discipline yourself not to touch unless it’s a real emergency. Maybe you don’t want to go through the trouble of creating another account, and just keep your money in one. It’s easy to keep track of your regular savings and how much should be in your emergency fund, right? Trust me, that never works. With our busy lives, the more organized we can be, the better. And believe me, if your emergency fund is in your regular account, you will end up using it.

Here’s a true story.  At one point our house flooded, and then the air-conditioner in my bedroom and our microwave oven conked out. This happened all in the same weekend. I actually wondered if there was a black cloud hanging over me. Kidding aside, but with one unexpected thing after another, I was really glad that I had some money put away.

I could have just put them on my credit card, it’s true. But the best thing about it was that I didn’t have to because my safety net—i.e. my emergency fund—was fully in place.

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Anna Maria Romero is the Deputy Director of Lifeline Foundation by day and a freelance writer by night. Lifeline Foundation’s advocacy includes empowerment through financial literacy, which is why she has written and taught on this subject on numerous occasions.An educator by profession and training, Anna Maria graduated from the University of the Philippines, cum laude, and taught for more than two decades, having opened a school in 1995. She stepped down as as principal of South City Central School in 2015 in order to pursue a career in the non-profit sector.She is a contributing writer to an online news site, and has been on the creative team of “This Journal Will Actually Change Someone’s Life” since 2008, which is published by FreeSpeech Publications in Manila, Philippines.Anna Maria is a passionate advocate, volunteer, organizer, counselor, communicator, editor, and traveler, who’s always ready to pack up and go where she’s needed.

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