Before Saving, have an Emergency Fund

The term "emergency" sometimes put us to a state where we panic. Often times we would ask what happen? Due to life's uncertainties we may really expect things to go not as planned, these unexpected things we may consider emergency. Different people have different emergencies and incidents in their life and often times may require resources to be used, particularly money.

A few years back, 3-years ago to be precise, it was my first serious encounter with a financial planner. He introduced me to savings, investing and insurance. The first thing he asked me was, "Do you have an Emergency Fund?" - my answer was what's that? I have money in the bank can I use that instead? - and he smiled.

He explained to me in simple yet specific way what Emergency Fund is, and where it's intended to be used. He also highlighted to me that savings should not be considered as emergency fund. So my question in mind is "what and how can i start my emergency fund."

The Financial Planner defined Emergency Fund as the accumulated sum of money which is saved in a bank, or any secured place you know that when you need it for emergency you can have it right away. Emergency not only in a sense when ours or our loved one's life is in danger, it can be on times when you loose your job or there is an urgent and unexpected circumstances in life when you need such money instantly.

He suggests - no, requires - that every individual who's capable of saving should have this fund before starting to save, because savings with out emergency fund will still be not savings because when you urgently need something you get money from your savings.

He suggests to accumulate three (3) to six (6) months worth of an individual's net salary. That means if you are earning a net income of Php 9,000.00 per month, then you should accumulate at-least Php 27,000.00 as emergency fund. It can be saved in a bank (or in your own vault if you have) but make sure you don't use it for personal or purchasing your wants. Not all emergency funds are enough to accomodate what you might need but it's better than to have nothing at all. You can easily increase your emergency fund anytime you have extra. Just remember that the bigger you save for your emergency fund, the lesser you need to accumulate if you fall short.

Right now I'm starting back again to square one and I'm going to do this seriously and consistently. Often times we neglect those minute decisions when you have resources in-hand - ready at our own disposal. Most of the time we gratify ourselves with the material things we see that seems to please ourselves and what we want others to see in us, those are very temporary. But to be truly delighted, it's better to know that your future is secured one step at a time.

We don't get from point A to point B instantly, it needs time and effort. We don't get rich overnight or just by saving money or having an emergency fund but when you do the steps and constantly devoting yourself for the change you want in your life and finances you might reach your point B in no time. So let's accumulate funds and start saving for our emergency fund.