Building an emergency fund

Preparation is very important in almost all aspects in life. It is important for us to be prepared for all types of situation especially that we can never know what the future holds for us.

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Saving for the rainy days

With regards to your financial preparation, having an emergency fund is extremely important in keeping you prepared to deal with what life brings, whether good or bad.

Making an emergency fund one of your most important savings priorities is a smart idea. Imagine by simply putting a small amount of $10 a week in your emergency fund, your money will grow to about $500 in a year. Normally, that’s enough to cover a repair bill or emergency travel. An emergency fund can also shield you from the high cost of borrowing, and keep you from hydroplaning into debt.

One of the reasons why people set an emergency fund up is to avoid borrowing. An emergency fund can give you more financial space to keep you afloat in a time of need. During financial emergencies, you don’t have to rely on credit cards or take out high-interest loans. This is especially important if you already have these obligations.

Building an emergency fund may seem overwhelming to some, especially those who have low income, but the truth is, it doesn’t have to be difficult. To begin with, you should set a monthly savings goal. This will get you into the habit of saving regularly and will make the task less daunting. One way to do this is by automatically transferring funds to your savings account each time you get paid.

If you don’t earn that much, you need to look for additional income. If you have extra time and willpower, you can have a supplemental income like an additional job or selling unused items to earn extra money.

There are many other ways to make building your emergency fund easier. For more on such type of fund, check this out: https://www.moneysmart.gov.au/managing-your-money/saving/building-an-emergency-fund