Rose Miller, head of the JN BeWi$e financial empowerment programme, advised that the sooner one starts making a financial plan, the more control that person will have over their money and future plans.
She pointed out that, “Building solid financial habits is critical for long-term success,” noting that, “establishing an emergency fund is a necessary building block for financial stability”.
An emergency fund is: Money set aside to cover the financial surprises that life throws your way. The purpose of that fund is to establish your financial security by creating a safety net, which can be used to meet unexpected expenses; and to reduce the need to draw funds from high interest debt options, such as credit cards or unsecured loans.
“Consider it as a financial cushion. An emergency fund should cover at least three months of your living expenses. This fund will enable you to take care of unforeseen costs using cash saved specifically for this purpose, instead of getting into debt,” Mrs explained.
Tips to Build an Emergency Fund:
- Set a Monthly Savings Goal: This will get you into the habit of saving regularly and will make the process less daunting.
- Start Small and Build Up Your Discipline: One way to do this is to automatically transfer funds to your emergency fund, each time you are paid.
- Save Your Unexpected Income: When you receive bonuses, raises, NHT refunds or retroactive payments, use those funds to boost your emergency account.
- Identify Supplemental Income: If you have the time and will power, seek a second job, based on your skills, or sell unused items from home to accumulate more money for your emergency fund.
- Assess and Adjust: If there’s money left over from your budget at the end of a pay period, move some of it into your emergency fund. If there’s no money left over, then you should re-examine your expenses. Determine which elements of your monthly budgeted spending that you can trim, and you’ll have cash left over to build you emergency fund.