3 Envelopes of Your New Life: Emergency Fund

If you've been into personal finance blog for a long time, I'm sure you have encountered the term "Emergency Fund" for a lot of times.

Emergency Fund is money that you put aside and intend to only use for emergency situations. This Emergency Situations are/but not limited to the following:

1. Accident or Medical Emergency

2. Natural Disaster

3. Fire

4. Anything that's a matter of life and death

5. You lost your job

Dealing with an emergency situation does not only make your stringer as a person but will also let you experience how well you handle  financial decision in life.

Your emergency fund is your first line of defense in case something goes out of the way. If you fail to have an emergency fund, you and your loved ones will suffer all at once.

Frequently Asked Questions

1. How much should I have in my Emergency Fund?

3-6 months worth of your income. This is the basic fund that you need to save. If you are earning 10,000 a month, your emergency fund should be 30,000-60,000 pesos. This is to ensure that you still have enough money to continue your daily needs for the next 3-6 months.

2. Where will I put my Emergency Fund?

There has been a long battle between keeping your Emergency Fund in hand and handling it to banks. I, personally keep my emergency fund with my BPI Save Up plus Insurance account. Click here to learn more about BPI Save Up plus Insurance. You can also open just a basic account for it though the risk of your withdrawing is higher specially if you opt for an ATM-based. The good thing about BPI Save Up is that I cannot withdraw my money. All I can do is transfer it to my active account which gives me more time to think again of my action. The bottom line is, you need to put in the safest place you could find. 


3. Can I invest even without the emergency fund?

It is highly advisable to first secure an emergency fund before any investment, big or small. Emergency Fund is very much useful for investments on the stock market as the risk is very high. You can also use this fund if in case you want to open your small business (and even online) for you'll have spare money to maintain your operation.

4. Emergency Fund or Pay for my Debts?

Of course there will be a big difference when it comes to either paying your debt or going for an emergency fund but for my personal view it will help better to secure your debts first so they won't hunt you down in the future. If you are in big debts you may settle those that have higher interest and slowly pool some small amounts to start your savings.  And also please note that you won't have any other debt other than the current just to minimize the wound on your financial state.

I hope that this blog post helped you!