financialtreat – will explain about What is an Emergency Fund? Here’s How to Prepare! which you will get in the following article. let’s look at this article carefully!
At the beginning of the year, Lifepal issued data related to emergency funds among indonesians. As a result, there are 90.7 Percent of the population who do not have an emergency fund based on the minimum emergency fund and only 9.3 Percent who have an emergency fund with the ideal amount. Then let’s pull back. What is an emergency fund?
Big and small Indonesian children are very familiar with the culture of saving. Moreover, there were many children’s songs in the 90s that addresse the theme of saving, for example “Saving” by Saskia and Geofany, “Saving Don’t Be Angry” and many more. But what do we expect from that saving?
What is an Emergency Fund? Here’s How to Prepare!
This is where it’s important for us to be aware of our purpose in saving. But, before arranging our finances with various financial goals, the first thing we have to collect as a people who cannot predict what events will happen in the future is to prepare an emergency fund.
Emergency Fund is a term coine for an amount of money that is deliberately reserve by the owner. Often misinterpretd as savings, an emergency fund is not actually intende for exclusive financial purposes. An emergency fund is neede for sudden and urgent needs.
The outbreak of the Covid-19 pandemic at the beginning of the year was cause by many terminations from companies to their employees due to a weakening economic convoy. During the termination of work, there are not a few people who when they lose their source of income directly.
Can’t make ends meet on the spot. This is where the importance of an emergency fund comes in. The emergency fund ensures that we can continue to meet our needs in the next few months even more when we have no income anymore.
How much emergency fund does a person need?
The emergency fund is calculate base on the amount of each family’s mandatory monthly expenses. Mandatory monthly expenses generally include house costs (rent, renting fees, mortgages, etc.), debts/installments, food costs, electricity, water, gas, and internet costs, transportation costs (gasoline, e-toll top-ups, etc.), and also children’s fees for those who already have children which include school payments, pocket money, tutoring fees and so on.
Each individual or family also has a different amount of emergency funds that must be collecte. However, in general, for singles and no dependents, the amount of emergency funds that need to be collecte is 3 times the expenditure.
For those who already have a husband and wife family without having dependents, it is 6 times the expenditure and for families who have dependents, both dependents of parents and / or dependents of children, at least have an emergency fund of 9 times the expenditure
For example, the expenses of A who is single and has no dependents are 5 million per month, meaning that the emergency fund he needs of 3 x 5 million is 15 million. In preparing it, the teanduit needs to pay attention to the following tips.
1. Determine how much emergency fund you need
Before you calculate how much funds you need, you must first check your average expenses each month. Ideally, when you are still single, the amount of funds you need to prepare is at least 3 times the average monthly expenses. For example, your average monthly expenditure is IDR 3 million, then you must prepare a minimum fund of IDR 9 million.
Unless you are marrie, but have no children, the amount of funds you have to prepare is at least 6 times the average monthly expenses. For example, your average monthly expenditure is IDR 5 million, then you must prepare a minimum fund of IDR 30 million. When you already have 1 child, your minimum emergency fund amounts to 9 times the average monthly expenses, and so on. The more dependents, the greater the funds you have to prepare.
2. Also determine the time period for preparing an emergency fund
You can set a time goal to reach the fund goal you want to prepare. By having goals, you can be more motivate to achieve them. You can prioritize your emergency fund savings first so that the target is quickly met before achieving other financial goals.
3. Separate the emergency fund account from the daily transaction account
It is important for you to separate the emergency fund in a place not only the account you use for daily transactions. This is so that the funds are not mixe so that the money will not be use or accidentally use for your routine needs.
You can also put your funds just in case you are in a money market mutual fund product. Not only is it more profitable than saving in a bank account, the funds are also automatically separate from the account for daily transactions. No need to worry, in tanamduit there are many choices of money market mutual fund products that you can choose for your emergency fund.
4. Look for additional income
Not only separating the fund account just in case from the daily transaction account, you can also find other sources of income for just in case. You can start a small business or find a side job whose results are mostly or thoroughly allocate to prepare funds. So, collecting funds can be faster.
5. Make sure you really use the funds for urgent matters
You should prioritize your emergency fund supply for urgent matters only, for example, unless you enter the hospital and do not have insurance, the cost of home repairs (for example: fires or earthquakes), and other urgent matters.
Don’t let you use the funds for a vacation or buy new gadgets to keep them up to date. You have to be smart to tell which needs are urgent, which needs we can postpone first, or moreover just our wishes. At least, you can live a quieter life unless your just in case funds are conducive.
6. Don’t make collecting an emergency fund a burden
You must remember, if an emergency fund is one of our precautions to deal with various possible emergencies that will occur in the next era. So, think of these funds as your helper later when dealing with a difficult atmosphere, after all, we ourselves also feel the benefits unless your supply of funds is sufficient and feels conducive.
What is the Ideal Emergency Fund to Prepare?
The ideal amount of emergency funds depends on the number of dependents in the household. Here is a breakdown of the funds just in case by the number of dependents.
1. Single
When you are single, especially without dependents and installments, allocating an emergency fund can be much easier. That is, you have no expenses beyond personal and lifestyle needs. Ideally, the amount of funds just in case you need to prepare is 3-6 times your monthly expenses.
For example, your monthly expenses are IDR 3 million, then the minimum emergency fund that must be prepare is 3 times the expenses or IDR 9 million. Make sure to allocate emergency fund savings every month until the minimum target is achieve. You can put it in a separate account with an expense account or put it in the form of a money market mutual fund.
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2. Married and have no children
If you are marrie, it means that your wife is already your dependent. Automatically, the ideal number of emergency funds also increases. At least you have to prepare funds with one dependent (wife) in the amount of 6 times the monthly expenses. For example, your monthly expenses are IDR 5 million, then the minimum fund just in case you have to prepare is IDR 30 million. Unless your wife works too, you can save an emergency fund with your wife. Set aside at the beginning of the month so that it is not use for unexpecte purposes.
3. Have a family
The birth of a child inevitably increases monthly dependents and expenses. Ideally, if you have one child, the minimum amount of emergency fund. That you have to prepare is 9 times the monthly expenses. Consider the monthly expenses of IDR 8 million. Meaning that the minimum precautionary fund that must be prepare is IDR 72 million.
Well, friends have started to borrow an emergency fund yet, right? You can, you know, save it in the form of a money market mutual fund. By buying it through the tanamduit application. There are various product choices that you can adjust to your financial goals, ranging from mutual funds, Sbn, and gold. Looking forward to more, let’s be ready for your funds just in case you are with tanamduit now. Thus the presentation of this article may be useful for you so much and thank you.