You can build an emergency fund, even with a small income

After the pandemic, the whole world has learned a valuable lesson: rainy days can turn into stormy years, and those can take a giant toll on our pockets. Some things are out of our hands, but at least we can make sure you’ve planned ahead and put aside your very own emergency fund. We’ve listed a few tips to help you get there the safest and fastest way possible.

When we speak of emergencies, these are unexpected and the causes are sometimes inevitable. A good emergency fund can give you enough support to help you with living expenses until you’re back on your feet.

Unless you’ve exhausted all options, it’s best to stay away from credit card expenses given that credit will only put you in a very uncomfortable debt. you would need to pay it off straight away, regardless of your job and income situation.

That’s way we’ve come up with a few tips to help you start an emergency fund, even if you’re not a savvy saver.

1. Start with a goal

It’s important to have enough savings to cover your rent and other basic expenses for at least three months. If you’re unsure about how much your usual end-of the-month number is, you can always check your bank app and see the average spending amount, and maybe keep in mind you will probably need a bit less, as you will be making some sacrifices.

2. Time to plan

The period you’ll need to save the money needs to be realistic and according to your income. For example, If you think your emergency fund should be of at least $10,000, your should be putting aside a bit over $800 a month to get there in a year. For some, it may sound like a piece of cake, whilst others can’t even save that much for the holidays. If that’s the case, a great option is to either extend your timeline or think of an extra income for a little while.

3. Make it work

If you think you’re not able to spare any change at the moment, you’ll have to get your magnifying glass out of the drawer and look for those hidden opportunities.

4. The % method

Another option is to divert a set percentage of your income into your emergency savings, once your non-discretionary expenses have come out. Whatever you have leftover is your spending money for the month. For example, if you have $150 a week left over after expenses, you could contribute 30 per cent ($50) to your emergency savings fund.

5. You’ve reached the goal, what’s next?

If you managed to save the intended amount of money and you’ve gotten used to sparing that percentage every month, why stop? You could put that money towards a well-deserved holiday trip, your dream house, etc.

Keep it safe… From yourself

If you think having easy access to that money will spark some spontaneous spending, better keep it safe. Make sure you can’t use it just by tapping on your phone or swiping a card. You could check for alternatives at your bank or talk to one of our financial advisers to choose your best option.