There’s a saying that “an ounce of prevention is better than a pound of cure.” That statement has become more relevant than ever because of the ongoing COVID-19 pandemic. It has served as a reminder that anything can happen at any time, and that it is important to be prepared for any emergency. One way for families to prepare for an emergency is by building an emergency fund. An emergency fund is defined as easily accessible cash that they can use quickly for emergencies, such as an ATM account that family members can easily withdraw money from.
According to Edric Mendoza, Registered Financial Planner and business anchor, in an ideal scenario, families should already have an emergency fund before an emergency even arises. But fortunately, it is never too late for families to build their emergency funds to prepare for the future. It can be challenging at first when a family starts building their emergency fund, especially since the benefits of having one are not immediately felt. But in an episode of FUNDamentals, a show on Plus Network hosted by Mendoza, he lays out the basics about what families need to know when building an emergency fund.
– The Size of the Emergency Fund
A family’s emergency fund should be 3-6 months of their expenses. It’s so that they can use the emergency fund for their daily needs in case family members need to find a job.
– The Job Industry
Another important consideration to make when setting aside an emergency fund is the industry of the person in your family who needs to look for a job. For instance, if it is easier to find a job in a family member’s industry, then they can have a smaller emergency fund. But if they are a specialist who takes longer to find a job in their field, then they need to set aside a bigger emergency fund for a longer transition period.
– Putting the Emergency Fund First
Families must prioritize their emergency fund, and find ways to cut down on expenses to build their emergency fund faster. Instead of going into savings or investing their earnings, families should put building an emergency fund first, since emergencies can happen anytime.
In the end, building an emergency fund is all about preparation. Mendoza says that families might not feel the benefits of having an emergency fund while they are setting money aside for it, but it will help them in the long run. After all, the COVID-19 pandemic has taught us that anything can happen and that it is important to be prepared.