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How to Start and Build Up an Emergency Fund

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An emergency fund is extremely important. This should be your first priority when building your finances because it acts as your financial buffer for unexpected events. As you already know, life is full of uncertainties.

In this erratic, changing world, not planning for the unexpected is a recipe for failure. Especially when it comes to your finances, it pays to think ahead. An emergency fund can be the difference between being financially prepared and scrambling for funds when the need arises. And in more extreme cases, it could spell the difference between life and death.

Now that we’re living during an actual crisis like COVID-19, you may think, “isn’t this the time we should be using an emergency fund, and not building one?”. Well yes, for a lot of people, this is indeed what’s happening (whether they like it or not). However, if you can still afford to save up, we highly recommend that you start one. It will be harder than usual, but it will be worth it. You never know if an even bigger emergency lies ahead.

To help you get started, we’ve listed down some pointers in starting your own fund:

What is an Emergency Fund?


An Emergency fund is a separate savings account dedicated to unexpected outflows of cash for uncertainties such as sudden loss of income, an illness, accidents, or any unforeseen expenses. To make it accessible, your emergency fund should be in liquid, easy to maintain accounts such as a savings or checking account for fast retrieval.

How to start an Emergency Fund


First things first, check your cash flow and evaluate how much you can set aside per month towards your emergency fund. While it’s ideal to have a sizeable initial deposit, you can always work your way to your desired amount. Once you finish setting your goals, you can proceed to actually opening an account.

What you’re looking for is an easy-to-access account that yield decent return despite its liquidity. If you’re feeling a bit more ambitious, you can also go for higher interest accounts to maximize your potential interest earnings, but that takes away from accessibility, which–in this case–is one of our top considerations. For a full overview of Security Bank’s savings and checking accounts, click here.

In terms of how much cash you actually put towards the fund, financial advisors recommend 3-6 months’ worth of your salary, or enough money to cover your monthly expenses during the short-term. A buffer of 3-6 months would also give you enough time to resolve your current financial dilemma and get back to your normal standing.

How to manage your fund


Managing your fund is more than faithfully depositing cash to it. To make sure that you use the fund efficiently, categorize what constitutes as an emergency to you. As much as possible, leave the fund alone for truly important cases such as the following:

  • Sudden loss of income. When your source of money is suddenly cut-off, your emergency fund will be your lifeline. Use it to pay rent, utilities, and daily expenses until you finally get a new job or a new means of income.
  • Health or Medical emergency. For illnesses or instances when your health insurance can’t cover all the expenses.
  • Property Maintenance. If there is structural risk in your house that needs immediate repair, if your car breaks down, or if a natural disaster strikes your home.
  • Other emergencies that you deem important. Sudden travel plans, acquisition of necessary equipment for personal/business use, etc.

The bottom line


Setting up an emergency fund is more than just being practical, it’s being responsible. Aside from having access to money when you most need it, the peace of mind you get from knowing that you are financially secured when times get rough should be enough of an incentive.

Read more: Should You Get a Personal Loan? Here are 4 Situations Where it Can Help You

If you haven’t set up an emergency fund, then applying for a personal loan is also an option. Unlike other types of loans, personal loans are flexible–you can use them for almost anything! Security Bank’s personal loan has a minimum loan amount of P30,000 and a maximum loan amount of P1,000,000. With an easy application, affordable payment terms, and approval in as fast as 5 banking days, you can start living the life you always wanted.

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