Financial Planning

Podcast Roundup: How to Save for an Emergency Fund (Episode 2)

How much goes into an emergency fund? How prepared are we for when something unexpected happens and we’ve got to foot the bill? In episode 2 of Keep It Simple, our hosts discuss their own emergency funds and methods that help them save money, including the 50/30/20 rule. Here’s a quick roundup of some key points: What Constitutes a Real Emergency? (2:15) Medical emergencies (accidents, food poisoning, etc.) Losing a job; getting fired or retrenched and losing your monthly income Equipment breaking down as emergencies: If a laptop breaks down but you have deadlines, then that’s an emergency because you’re using it everyday People may feel like these events won’t happen to them, until it actually does How Many Months of Income is Your Emergency Fund? (4:00) Calculate the fund in terms of your expenses But your expenses might increase in the future, so that number may change Typically, three months’ worth of expenses is a good starting point; if one loses their job tomorrow, they’d be able to hold out for a couple of months before getting employed again Up to six months is a good ballpark amount, because we don’t want to channel too much money away unnecessarily Millennials are still very employable Saving: The 50/30/20 Rule (8:05) It’s a rule people have definitely heard of before and use to allocate their monthly income to save 50% goes to essentials, 30% goes to wants, and 20% goes to savings But if you’re very familiar with your spending habits, then you might not have to lean so much on this rule for guidance Other Tips to Save Better (14:00) Be aware of how you spend and how you save It’s important to have a plan, so we’ll know what to expect without mindlessly spending money every month Plan your purchases in advance Transfer your savings to a bank with bad UI to discourage you from withdrawing it (19:00) Separate saving accounts are useful to help you save better Listen to the full podcast episode here.