How to Build Your Emergency Fund in the Philippines

Doing your budget every time you get your pay can be tricky at times. Often, people find it stressful to allocate earnings efficiently to certain expenses and funds. But it is more frustrating if you have unexpected spendings and you don’t have funds readily available.

Most Filipinos have the same struggle when it comes to budgeting. They prioritize expenses over savings. So, when an emergency occurs, they don’t have money to finance the expenditures.

Financial emergencies can happen at any time with anyone. Even a country can also experience the same thing. Ever since the pandemic began, many countries strived to finance their measures against the COVID-19 outbreak. And the Philippines is no exemption. Accordingly, the Philippine government provided a 275 billion emergency fund for the pandemic response.

No matter what emergency occurs, it is vital to have financial plans. And having an emergency fund should be the first thing to prioritize as it serves as the backbone of your personal finances. It must be very familiar to you, and you probably have the idea of its importance. But what is an emergency fund, really?

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What Is an Emergency Fund?

By now, you are aware of how uncertain life can be. You may be enjoying your financial wealth today, but no one can guarantee that you’ll experience the same thing tomorrow. When it comes to uncertainties, it is better to prepare yourself financially.
Every financial advisor would always say to save up for the emergency fund before anything else. This is very true because your emergency fund will protect you from your future financial issues. And that is the purpose of an emergency fund – to create a safety net as your financial security.

Meaning of Emergency Fund

The emergency fund is the readily available cash that can help you operate despite financial problems. It serves as your source of money when you face an unexpected financial dilemma such as losing a job. During the COVID-19 crisis, many Filipinos have lost their jobs. And what’s worse, most of them don’t have enough emergency funds to finance their daily necessities.

Most Filipinos allocate their earnings first to their expenses rather than to savings and emergency funds. But some of them do not even include these in their budget. They live within the extent of their pay, not having financial plans when contingencies come. They focus only on their daily expenditures. Their reason is they earn very minimally to allocate for savings. The emergency fund can be synonymous with savings. However, emergency funds do not focus on certain life goals like what other savings do. Some people know a little about budgeting, so they put all their savings on a certain financial goal alone. It is good to have savings. But having savings with a goal of buying something in the future will not make you financially independent.

The emergency fund is your savings for the unexpected financial crisis. That is why it is important to understand that the emergency fund is for uncertainties only. Generally, an emergency fund depends on your income, lifestyle, and necessary expenses. You don’t have to earn a lot to include it in your budget. Discipline and consistency are the essential keys in allocating for an emergency fund.

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How do I Create an Emergency Fund?

Creating an emergency fund can be confusing for many people. But if you understand its importance, it will be easy for you to follow a guideline that suits your finances. Here are the simple steps that you can use on how to make an emergency fund effectively:

1. Make your budget

When making a budget, start with your expenses. Identifying your expenditures will help you figure out which of these are essential and non-essential. Typically, you can find these from your credit card and bank statements.
After classifying your expenses, get the sum of your essential purchases. The total will determine your emergency fund – how much and how often you should allocate money for it. The recommended budget for an emergency fund is equal to 3 to 6 months of your total monthly essential expenses.

2. Avoid unnecessary spending

Discipline comes at this part. Along the journey of saving up for an emergency fund, you will encounter some temptations. It may be a discount sale on your favorite boutique or food cravings that you can cook at home. Whatever it is, you need to resist the temptation of spending too much by following your budget plan.
Additionally, determine if you have recurring expenses such as subscription or membership that you do not basically need. Canceling these costs will help you save more for your emergency fund.

3. Choose where to keep your emergency fund

Another thing that you need to know is where you should keep your funds. You should put your emergency fund somewhere that you could easily reach. Of course, do not place it under your mattress. Typically, people keep their emergency funds in the bank, where they can instantly withdraw their money. However, it is also better to put it in a separate account from the accounts you use for paying bills.
Financial advisors often suggest that you should put your emergency fund in high-yield savings from your bank.

4. Pay yourself first

Make your emergency fund the top priority over your optional expenses. Most Filipinos fail in this area. Thus, many still struggle with having enough savings.

5. Increase your earnings

Most Filipinos reason out that they can’t allocate a budget for savings. They often say that their earnings are not enough even to cover up all necessary expenses. If you have the same struggle, the best way is to increase your earning capacity. Nowadays, there are a lot of means to earn more than your monthly salary.Get a side hustle or have some form of passive income. Be creative and clever enough to have additional income so you can save faster.

6. Create rules when to use your emergency fund.

In this part, you can create a list of events that will force you to use your funds. Make sure that these are adequate to consider an emergency. It can be losing a job, medical emergencies, unexpected house repairs, or natural calamities. And of course, always replenish it whenever possible.

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Where Can You to Put Your Emergency Fund in the Philippines?

As mentioned above, the better place to put your emergency fund is somewhere you can easily withdraw. Many people wonder where to put the emergency fund in the Philippines. In choosing a facility for your funds, ensure that it is:

• Safe from market risks;
• Easy to access and always available;
• Income earning.

Typically, the best place to put your emergency fund is in a savings account or a money market fund.

The Savings Account

Savings account in a bank is the first option to put in the emergency fund. Aside from the fact that you can easily withdraw your funds from the bank, it is safe from the risks of the market. You can also earn passively through its interest rates.
The interest rates vary on each bank. So, before opening an account, it is better to search for the best bank that suits your goals and priorities.

The Money Market Fund

If you already have enough funds for any contingencies, you may want to check the money market funds. Money market funds are securities sold in retail to the investing public. They are interest-bearing instruments that pay interest at a periodic interval. Typically, they mature within a year. Additionally, they are relatively low-risk.
When selecting the best money market fund, look for a fund that:

• Does not have any sales load;
• Has a low management fee;
• Has no holding period.

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How Can an Emergency Fund Help Me?

Clearly, an emergency fund is your financial tool to handle uncertainty. It will give you peace of mind whenever a financial catastrophe occurs. And when you have this sense of preparedness, you will never drain your hard-earned savings.

Who doesn’t Need an Emergency Fund?

Now, you might wonder if there is someone who doesn’t need an emergency fund. Some people do not allot money for this kind of savings simply because they believe they have a secure job. They are working in an industry with a high demand field, and they can always find a new job. And they also think that their credit cards with waived annual fees can save them from unexpected expenses. Sure, they have the capacity to pay off debts right away, anyway.
But how about those who do not have an emergency fund because they do not have the means for it?

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Where to Get Money Without an Emergency Fund?

Life is full of surprises. Unfortunately, not all surprises mean good things. Many Filipinos are still living with an average income. And admittedly, most of them have no savings at all. If you are experiencing the same thing, life must be harder for you during difficult times. Saving up for an emergency fund is the last thing you would probably ever do with your earnings.

But what’s worse is when you are having financial troubles, and another unforeseen financial catastrophe is coming your way. You don’t have any savings. What to do now?
Fret not. For every problem, there is always a solution.

Digido is a legitimate online company that gives fast loans to Filipinos. With Digido, you can get money and cover your emergency expenses even if you don’t have any savings. Digido offers loans online with great convenience – you don’t even have to leave your house. Within only 4 minutes, you can receive up to PHP 25,000 on your bank account. Digido does not require a guarantor, documentation, or guarantee deposit for you to get a quick cash loan. Additionally, the service is fully automated.
Indeed, Digido is the best facility that you can count on when having trouble with any financial emergencies.