In our last article, we discussed why it is important for the breadwinner’s income in a family to be protected by life insurance.
Today, we will be looking at the importance of an emergency fund for your family. If you are the breadwinner and you do not have an emergency fund, you need to strongly consider setting one up now.
As a result of the ongoing pandemic, now is the best time for us to restructure our financial portfolio.
Good Habits
The last twelve months was a very trying time for lots of us, and it probably exposed some gaps in our financial portfolio. Can you honestly say you have exhibited good habits when it came to saving in the past?
In Kristin Mc Kenna’s Forbes article, “Here’s How Much Cash You Need In An Emergency Fund, And Where You Should Keep It”, she stated that the rule of thumb should be approximately three to six months of fixed expense set aside as an emergency fund.
If you are not in a position to put aside six or even three months, start with one month. An ancient Chinese philosopher by the name of Lao Tzu said “a journey of a thousand miles begins with a single step“.
Will Your Saving Last
Pandemics don’t come around every year. However, other challenges can manifest themselves at a higher probability and bring about an unexpected financial shortfall for the family.
Here are some events that can curtail your income:
- A pandemic
- You are laid off/fired (even temporarily, e.g. furloughed)
- The Company you work with goes into receivership
- Illness
- Natural disasters
If any of the above happens to you, how long will your savings last? Will you be able to continue to pay outstanding loans/mortgages and cover the fixed expenses in the home while you search to get another job if it’s not because of an illness?
If you don’t have any dependents you might be able to handle it, but if you have dependents it may not be that easy.
Easy Access
Your emergency fund should be fairly easy to access, while at the same time placed in an account where you can get a decent return on your funds.
In their article “Where to put your emergency fund”, Cassidy Horton and Peter Carleton shared some options for you to place your funds.
After the harrowing events of 2020, we shouldn’t think twice about establishing an emergency fund.
Income Fund
It doesn’t matter where you are in the world; it is important to set up an emergency fund for yourself and your family.
At my Company, the Guardian Group, we have one of the best performing Income Fund in Trinidad and Tobago. Even though you have easy access to your funds, the returns are also very good for an Income Fund.
You can click here for details on Guardian Group Trust Income Fund and other investment opportunities.
Consistent Saving
Once you establish your emergency fund, you can use the same discipline to accumulate a cash lump sum for other projects for yourself and your family.
The habit of consistent saving is a good habit for us to pass onto our children (piggy bank), no matter their age. We shouldn’t allow this period of change to go to waste – both for ourselves and our children.
Conclusion
If you are going to implement an emergency fund for yourself and your family you will need to organize a plan, and attached are some free budgeting templates from Excelchat to get you started.
If you don’t have an emergency fund, let’s get one started now. Please use all the links in this blog to get the full value of the article and let’s get this done now.
