World Savings Day, celebrating its 100th anniversary this October 31, is approaching and offers an excellent opportunity to reflect on the importance of an emergency fund. This fund is understood as a portion of readily available liquidity intended to cover unforeseen expenses.
Such a tool is essential to protect our savings and ensure economic stability for ourselves and our families.
Life is full of uncertainties and unpredictable events—from a broken washing machine or car to job loss or health problems—that can severely strain our financial resources. Having an emergency fund allows us to face these situations with greater peace of mind, without depleting our savings or, worse, resorting to loans.
Knowing that we have the necessary financial resources to cover unexpected expenses can significantly reduce stress levels, thereby improving our quality of life.
Furthermore, having liquid funds readily accessible enables us to make important decisions freely and without excessive financial pressure.
Whether it’s investing in a new opportunity or temporarily leaving one’s job, an appropriate reserve gives us strength, allowing us to choose what we truly desire for our future.
Three Tips for Building an Emergency Fund
- Start Small
Even a small monthly contribution makes a difference over time. It may be enough to save a reasonable portion of your income each month and commit to not touching it unless absolutely necessary. Gradually, the amount will grow, providing increasing peace of mind and motivation to persevere, perhaps allocating a larger portion to the fund.
- Calculate Essential Expenses and Set Goals
Ideally, an emergency fund should cover at least 3–6 months of essential living expenses. How can you calculate them?
Generally, these are fixed costs related to housing, utilities, food, and other daily necessities. Multiply your monthly expenses by 3 or 6 to determine the amount required for a fund that provides a sense of security.
It’s important to strike the right balance and avoid over-saving. Excessive thriftiness can verge on stinginess, and the emergency fund shouldn’t constitute all your savings—some should still be invested to yield returns over time.
- Automate Your Savings
If saving doesn’t come naturally to you, automatic transfers to a designated account can be a big help. This can be set up directly with your bank or via one of many online apps designed for this purpose. Set a fixed amount to be automatically deducted from your income each month and credited to your emergency fund until your goal is reached.
An emergency fund should not only be seen as a precautionary measure but also as a cornerstone of personal financial management. The earlier we consistently start building our economic reserve, the sooner we can count on a safer and freer future.
The Museum of Saving was established to promote financial literacy and help its visitors develop proper economic awareness. In addition to collaborating with schools, it organizes numerous in-person and online events dedicated to adult financial education. If you’d like to learn more and improve your knowledge to achieve full financial independence, keep reading our blog and visit our website.