Protect Your Wealth
Imagine you have been saving money for several months for a holiday. You have saved B$400, just about enough for a plane ticket. Unfortunately, you get into a car accident on your way to the travel agent, causing damages that cost B$450. Imagine that you do not have motor insurance or any other form of protection to help cover those costs. This means that you would need to utilise your savings for the trip.
So, what is the “roof” for your finances?
Examples include an emergency fund, takaful/insurance and a will.
How much should I save for my emergency fund?
Without an emergency fund, if someone lost their income what would they do? How would they meet their needs? How would they feed their children, buy their groceries, and pay their existing loans?
Is it fair to leave their loved ones without any protection? Is it fair to turn to other people, or the authorities for help? We should be responsible and independent with our finances and find ways to protect our own selves and our loved ones.
A rule of thumb is to have an emergency fund that is at least 3-6 months of your expenses.
In other words, if anything happens, you can sustain yourself for at least 3-6 months. This number is the minimum recommendation. You can of course save more than that!
Calculate how much your emergency fund should be: Your monthly expenses = $____ Emergency fund = $____x____ months =____