How much cash you need to stash for an emergency? We run the numbers.
Picture this: your car has broken down and the mechanic has quoted you a whopping $500 to fix the issue, but payday isn’t for another fortnight...The #stress is setting in. Palms sweaty, knees weak, arms heavy etc.
This is the exact kind of situation an emergency fund calls for.
An emergency fund is a separate savings account (away from all your day-to-day accounts). Instead of putting your money towards a goal, the emergency account is there in case of an emergency - aka car troubles or an unexpected bill.
It means you don’t need to borrow money from family or friends to get by, and you don’t need to take out a credit card or payday loan (don’t even get us started!). These products could hurt your credit score in the long run.
Most experts reckon a good goal is to have enough emergency funds to cover three months’ worth of necessary expenses.
Think: rent, bills, transport, groceries and other debt repayments. Your emergency fund is designed to get you through tough times, so you'll need to say goodbye to extras like dinners, shopping and savings.
There’s no right or wrong answer to this question. However, just keep in mind that your emergency fund won’t grow as quickly as your savings account - and that’s okay!
Try putting away $25 per week. After 12 months, you’ll have $1,300 in your emergency fund. Some weeks, you might be able to add a little extra in there. Others, not so much. As long as you’re consistently putting away some money into your emergency fund, you’re setting yourself up for success.
In fact, playing Flux’s weekly saving game Win the Week, will help you create your emergency fund real quick. And you can win a life-changing amount of money.
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