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Tips to Prepare an Emergency Fund for Unexpected Costs

Oct 23, 2022
4 Minutes

Almost everyone has experienced having to deal with unforeseen bills in the past. Some examples are the leaky roof of the house, a broken smartphone, and many other unanticipated, expensive events that occur abruptly. 

These unforeseen costs may interfere with your cash flow. If you have an emergency fund, you can prepare for this. Emergency funds are money set aside in the event of an emergency, such as a layoff (termination of employment), an accident, damage to products or property, or other expenses not covered by the monthly budget.

What is the significance of an emergency fund? You don’t have to be concerned about finding funds when you suddenly require significant sums of money. There’s no need to get into debt or pawn your possessions. Also, you won’t have to disperse your investment money to address emergency demands, so your investment can remain optimal.

How much money should you save for an emergency fund? The numbers differ. For those of you who are single (unmarried), the emergency fund you should have on hand should typically be 3 to 6 times your monthly expense. Meanwhile, married people need at least 6–12 times the monthly expense.

However, in light of the current COVID-19 pandemic, the amount of emergency funds that must be gathered has grown to 12 times the monthly expense. The COVID-19 pandemic has put us in an unexpected situation. Nobody can predict if your income will remain stable, decrease, or fall to zero due to layoffs. Many businesses are forced to reduce staff salaries by 25–75% to stay afloat. Some would even postpone salary payments for months.

There is no way of knowing how long the COVID-19 pandemic will last. This is a lesson for all of us about the need to have an emergency fund. If you don’t have this fund or only have a little bit but still not enough, consider the following recommendations to help you gather your emergency fund:

Calculate Your Monthly Expenses
First, calculate your monthly expenses, then set a target amount for the emergency fund. Check the cash flow as well. Is it possible to add extra amounts to your emergency fund? If possible, you should immediately separate it from other expenditure money.

Prepare a Separate Savings Account
Make a separate account for an emergency fund and one for daily transactions. Do not mix an emergency fund account with your daily budget. A savings account, for example, is an excellent place to save emergency funds because it is liquid and immediately accessible. As a result, in an emergency, cash will be disbursed instantly and without delay.

Allocate Your Income
Begin dedicating a portion of your monthly income, at least 5%, to an emergency fund. You must send money for an emergency fund straight into a dedicated online savings account when receiving a paycheck. Allocating bonuses, allowances, and THR to an emergency fund account will help you collect emergency savings faster. Furthermore, selling unneeded items with a resale value will help you build your emergency fund.

It’s never too late to start preparing your emergency fund. However, you must be consistent in saving for emergencies. Creating an emergency fund is not something that can be accomplished quickly. It requires willpower and discipline to achieve it.

If you do not have a dedicated account for the emergency fund, you can open a PermataTabungan Bebas account. There are numerous benefits to using PermataTabungan Bebas, such as:

  • Free cash withdrawal. You are not required to pay cash withdrawal fees—without any conditions—at any ATM until December 31st, 2021. This free cash withdrawal is available at all ATMs worldwide with the VISA/PLUS logo.
  • The PermataDebit Plus debit card provides convenience for online and offline banking transactions.
  • An SMS Navigator service allows you to track transaction history more quickly.
  • Simple and quick account creation. It is now quicker and faster to open a PermataTabungan Bebas account. Simply download the PermataMobile X mobile banking application and open an account instantly from the app.
  • Free transfer fees, whether using PermataMobile X, PermataNet, or ATMs (if the balance before the transaction is at least IDR 5,000,000).
  • If your average balance in the preceding month was IDR 5,000,000, you are also exempt from monthly administration fees.

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