The importance of setting up an emergency fund

emergency-fundIf ants can set up their stock of food for the rainy days, why can’t people do the same? We all know that an emergency fund is noteworthy for saving us from future financial troubles. But most people just can’t set up such. How come? It’s because most of us are economically procrastinators. An emergency fund is not necessarily built instantly and magically. For individuals who don’t have the abundance of money, they can simply build the fund gradually – simply starting from a little amount of cash. For people like me, who loves investing and hates burying of money, setting aside cash for an emergency fund seems to be like putting bucks into sleep and not using it to work for profit. But an emergency fund is not just another kind of money putted inside a piggy bank. Emergency funds are investments that can save you from near future financial disasters.

In our lives, we should be alert of things that can happen unexpectedly. These things include future financial emergencies brought by a sudden job loss, unanticipated medical expenses, property repairs and other financial urgent situations. Without an emergency fund or cash ready to cover these expenses, people will result to loans and credits. Some people are forced to sell assets and properties they never dreamed to dispose, just to survive an emergency condition. The “selling of your resources when an emergency comes” is just like looking for money when you need it. This scenario should not happen to us because it would lead us to sell our properties at horrifying bargain prices just to realize emergency proceeds. Thus, we should find money even if we don’t need them today. We should look for funds for our future needs.

In setting up an emergency fund, we can start by putting aside a little amount of money every time we earn money or receive our salaries (e.g., weekly or semi-monthly). This amount may not be big enough to give you current financial inconvenience – and this action must start now. Of course we can also start by placing big amount of money if we have extra funds today. This placement can come from our bonuses, incentives and other income which we don’t regularly expect. We can deposit them at the banks as a savings account, which are not restricted and also earns a very little interest income. If we only start at a little amount, we can keep them in our own for the meantime and then place it in the bank when it grows. What important is – we should start setting up our emergency funds now and overcome procrastination.

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