An emergency fund is one of the important things that need to be prepared in personal finance. Whatever the situation, whether it’s job loss, accident, or natural disaster, an emergency fund can help us survive for a long time without being disturbed by unexpected financial problems.
However, there are still many people who ignore the importance of preparing an emergency fund. Therefore, you should know how to calculate the right emergency fund and tips for preparing emergency funds properly.
Read on in full so that you are ready to face a more calm and financially protected future.
Read Also : What is Investment? Definition, Types, Objectives, Risks, Examples, and How
How to Calculate the Correct Emergency Fund
An emergency fund is a fund that needs to be prepared to deal with unexpected situations, such as losing your job or having an accident that causes you to be unable to work.
This emergency fund will later be used to meet daily living needs until you can find new income again or recover from your illness.
Therefore, it is important to know how much emergency fund you need to prepare in the right way. To calculate the right emergency fund, there are several things you need to pay attention to.
- Calculate monthly expenses. Write down all the monthly expenses that you usually incur, including food, electricity, water, internet bills, and so on.
- Determine the number of months to save. As a reference, some financial experts recommend saving at least 3-6 months of your monthly expenses.
- Multiply your monthly expenses by the number of months it takes you to save. This will give an idea of the amount of emergency funds that need to be prepared.
- Make sure to include all the important and routine expenses that you have to pay each month. This will help you get a more accurate picture of your regular expenses.
- Always remember that the amount of emergency funds that need to be prepared can vary for each person depending on other needs and financial conditions. Do the calculations carefully and carefully to get the amount of emergency fund that suits your needs.
By following the steps above, you can calculate your emergency fund easily and quickly. Make sure to prepare an emergency fund properly so you can feel more calm and protected when facing unexpected situations in the future.
Read Also : 16 Best Stock Applications Safe to Use
Tips for Preparing an Effective Emergency Fund
Preparing an emergency fund is one of the important things that needs to be done to maintain your financial condition. An emergency fund will help you deal with unexpected situations such as losing your job or having an accident that makes you unable to work.
However, preparing an emergency fund is also not easy. Here are some tips that can help you prepare a good emergency fund:
1. Keeping a Simple Lifestyle
You need to know and limit your spending so you don’t overdo it. Keeping a simple lifestyle will help you save money and better prepare for an emergency fund. Don’t forget to prioritize important needs and reduce unnecessary expenses.
2. Make a Monthly Budget
Making a monthly budget is very important for preparing an emergency fund. By creating a monthly budget, you can see how much money is coming in and going out each month.
From this, you will be able to determine expenses that need to be reduced or eliminated. That way, you can save money and better prepare your emergency fund.
3. Make Long Term Financial Planning
Making long-term financial planning is also very important for preparing an emergency fund. You need to determine long-term financial goals that you want to achieve, such as buying a house or preparing for children’s education.
By knowing your long-term financial goals, you can better adjust your monthly budget and prepare for an emergency fund.
4. Create an Emergency Policy
Making an emergency policy is very important to prepare an emergency fund. You need to determine the amount of money that needs to be saved and the type of investment that will be used to save an emergency fund. In addition, you also need to know how long the emergency fund can be used.
5. Always Save
Saving is the key to preparing an emergency fund. Start saving every month, even if only a little money can be saved. By saving consistently, you can better prepare your emergency fund.
Those are some tips that can help you prepare your emergency fund properly. Remember that preparing an emergency fund is not easy, but with consistency and patience, you can prepare an emergency fund better.
Read Also : 10 Best Mutual Fund Applications in Indonesia for Investing
Where Should Your Emergency Fund Be Kept?
An emergency fund is money saved for unexpected situations such as job loss, accidents or natural disasters. However, when saving an emergency fund, many people wonder where to keep the emergency fund.
Here are some options to consider for saving an emergency fund:
1. Ordinary Savings
Regular savings are the easiest option and are often chosen by many people. Even though the interest given is not very large, ordinary savings can provide high liquidity and are easy to access.
2. Deposits
Deposits are savings that have a certain period of time and provide higher interest than ordinary savings. Deposits also have the advantage of being guaranteed security from the Deposit Insurance Agency (LPS) of up to IDR 2 billion per customer.
3. Money Market Mutual Funds
Money market mutual funds are investment instruments that have a low level of risk and provide higher returns than regular deposits or savings. However, money market mutual funds have a lower level of liquidity compared to ordinary savings or time deposits.
4. Government bonds
Government bonds are a safe investment and provide good returns. Even though the risk is quite low, the level of liquidity depends on the specified time period.
5. Gold
Gold can also be used as an option for saving emergency funds. Gold is considered a safe and stable investment in difficult times. However, before deciding to invest in gold, be sure to understand the risks and rewards associated with the investment.
Read Also : What is Preferred Stock? Types, Characteristics, and Examples
The choice of where to save an emergency fund depends on the needs and financial conditions of each individual. Before deciding to save an emergency fund, be sure to consider the level of risk and liquidity of each investment choice.
Choose a suitable and safe place to store your emergency fund in order to provide better financial protection when facing unexpected situations in the future.
In personal finance, preparing an emergency fund is very important. Whatever the situation, whether it’s job loss, accident, or natural disaster, an emergency fund can help us survive for a long time without being disturbed by unexpected financial problems.
However, there are still many people who ignore the importance of preparing an emergency fund, even though this is very crucial for financial security in the future. Therefore, it is very important to know how to calculate the right emergency fund and tips for preparing emergency funds properly.
By understanding the importance of an emergency fund and knowing how to calculate and prepare for it properly, you can feel more secure and financially protected in the future. Don’t forget to always save and prioritize important needs in order to strengthen your financial condition, OK ?