How to Make Emergency Fund in 2024?

Spending money on yourself is a good thing. But be always prepared for any unexpected expenses. So it’s better to save money for any unexpected situations, rather than taking a loan or sinking in debt. Let’s suppose, downsizing happens in the company where you work. If you get fired, you will get a panic attack. That is how you will pay rent and bills while living in Malaysia.  

So to overcome this type of situation, there must be emergency funds. Only emergency funds can save you from becoming bankrupt in medical emergencies or jobless situations. So to avoid a long-lasting effect on finances, you should know about emergency funds. What is it, and how does it save you from getting broke? Read more to defeat financial worries. 

What are Emergency Funds?            0,

Emergency Funds or cash is a generous phenomenon; it is not about just having money. But also a peace of mind that you are in the safe zone and there is no need to worry about financial expenses. So everyone should prepare themselves for any unplanned expenses. An amount that you save every month in your bank account for unexpected expenses are Emergency Fund. 

If you are jobless or you need to pay a huge medical bill, only an emergency fund can save you from panicking at that time. And you easily manage any of the hard situations confidently. Life is not a bed of roses and unexpected expenses don’t come after telling you. So prepare yourself to breathe easier by building an emergency fund.

Because emergency cash aids are like a financial cushion and support you in your hour of need. You can also stay away from high-interest personal loans and expensive credit cards. So if you live in Malaysia and want to be debt-free for the rest of your life. Then why not opt for an option, that is easy to manage and reduces your financial worries? 

Importance of Emergency Fund 

Unplanned expenses can happen to anybody anytime, but it’s up to you how you handle it. Either by using an emergency fund or falling into credit card debt or personal loan. The choice is yours. So for this purpose, the government of Malaysia also set up EPF, that is employees provident fund. It keeps your emergency fund which is your 6month salary. 

So you have to make a financial plan according to your income. Then you can build an emergency fund that helps you in any hard time. Why not avoid financial worries by saving a small part of the money? If you are uncomfortable with your savings, then cut off extra expenses and save more money. Emergency cash is important in many ways:

• Emergency saving will save you from getting bankrupt in case of an emergency like a car accident. You have to pay for medical expenses and car repairs too. 
• Emergency Fund can let you handle unplanned expenses without using high-interest credit cards. Like going on a trip or university fee payments or purchasing a big appliance. 
• Emergency cash erases any financial worries or anxiety in case of being jobless. You are searching for a new job but still have an emergency fund to pay all the rent and bills. 

According to research, 57% of people are satisfied with their emergency fund status. While the other 47% are trying to meet the standards. If you are one of those, it’s never been late to start the process of saving. Otherwise, in the hour of need, you will have to use a credit card to take a loan or ask for money from friends/family. 

What to consider when having an emergency fund? 

What do you think about how much emergency savings you should have? It should be at least 3 to 6 months of your salary. So you don’t have to rely on anyone, in time of need. There are things to consider when you want to save some money. 

Assessment of risk

To build an emergency fund, first, you have to know how much to save and what are the risk elements. Experts say that a normal person should have 3 to 6 months of salary as a saving. But if you are a businessman or industrialist, then you have 9 to 12 months of income as a saving.

So focus on key points like job risk and health risk. If you get fired, then what are the possibilities and if you get sick then what will be the medical expenses? 

Calculation of expenses 

Savings always evolve around your salary and expenditure. Focus on managing monthly expenses like house rent, bills, grocery, transportation, cell phone, and credit card first. Have some amount in hand for any other expense and save the remaining money. Keep in mind that don’t ever over-save and start living a miserable life. Make a balance in your expenses and start saving from small amount. 

How much to save?

Start with a smaller goal of saving RM1 daily. After some time, increase it to RM5 per day. A collection of drops can make an ocean. Similarly, saving a small amount for several months will let you achieve your emergency fund goal. While you can enjoy your lifestyle too.

Where to save

Keeping savings at home is not a good option. Many banks in Malaysia have provided you with the opportunity to open a savings account with a high yield. So always go for an account option with low fees and high yield. 

Keep these points in mind and begin your financial journey by saving from now on. You can determine it by multiplying the total income by several months. So you have a net worth you want to save. 

Good practices for having an emergency fund

You can avoid any financial crisis by having an emergency fund. But how can you save yourself from financial damage? What are the steps that are required for a good level of emergency fund? Here are some of these:

Make a budget to build an emergency fund 

According to research, 20% of the people in Malaysia are very strict towards their budget. Budgeting is the only technique through which you can find out how much to spend and what to save. Download any budgeting app to get a detailed view of income, expenses, and financial status. It also helps in determining your emergency fund goal. 

Use saving options 

Direct deposit allows the paycheck or fund to be transferred into the savings account. You don’t need to go and deposit manually. There are also many saving apps, where some amount of money is directly transferred. 

Boost the savings

Let’s suppose you started to save money from RM1 daily or RM50 per month. Now you got a promotion or a new job with an increased salary. You should also increase your saving rate to achieve your saving goal. Sometimes you get unexpected money like a bonus, inheritance, or tax refund. This is also like a token of emergency fund. 

Continue saving 

Saving is a continuous process. It doesn’t mean that you reached your saving goal, now you don’t need to save more. You can be jobless anytime or any unexpected injury occurs. So if you have more money saved in your account. You will be saved from any type of inconvenience. 

Final words

No matter how much you earn, start saving money for emergencies from now. Because the emergency funds will help you from drowning in debt and also stabilize your financial goals. You will not have to ask anyone for money or use a high interest credit card. So if you prioritize the emergency fund, then it will help you remain peaceful and financially stable in your hour of need.