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How much should my Emergency Fund be?

How much should my Emergency fund be

What is an emergency fund? It is an amount of money/ liquid cash that we set aside with the sole purpose to use during the emergency time like
#1. Loss of job (Can be due to various reasons eg: Company restructuring, retrenchment, unable to find a new job)
#2. An illness (This included closed family members as well hence the importance of hospital coverage cannot be stressed again)

How much should my emergency fund be?

Follow the simple guidelines of financial planning, the amount of emergency fund you should set aside is 3 to 6 months of expenses. This amount is set aside to provide for the living expenses of your family to tide through times of uncertainty or unexpected events. It is set aside as your safety net and it is should be highly liquid. 

This is should be only the reason why you should hold on to cash. Because anything more that amount, your cash is actually being wasted. 


3 things you need to know about setting aside for your emergency fund

#1. Where to put emergency funds?

Using savings accounts to earn maximum interest for this highly liquid cash. As I always say, liquidity comes at a price. In the market, there are a few normal savings accounts which you can make full use it which I always encourage my clients to have their emergency funds set up there.

You can pm me if you are interested to find out more. 


#2. Inflation

There is a thing called inflation. Inflation starts to eat into your cash. Because cash is not growing. What you need to do is to make sure cash is deployed to do something better. When I am talking abt cash, I am referring to the excess after setting aside your emergency fund that.

Anything in excess of that should be deployed in investment or making sure that the income is a guarantee. This most important part is because you don’t have an income, you don’t have any cash left in your retirement.

In this section, we list out content that can help you know more about retirement planning



#3. Holding too much cash

To avoid you from holding too much cash. It is important to make sure that you have income protection and adequate hospital plan to cover medical expenses. This will keep the chance of unexpected events from happening low. Hence you can have all your excess cash is being used or deployed as an investment as growing faster than inflation. Because if you are not beating inflation, you are actually losing money on a daily basis. 

Giving you a simple analogy, if you are running a business and you notice that things are getting more and more expensive how would you handle that? You see, life only becomes more and more expensive. You need that income and that income is the most important factor when it comes to retirement planning. And making sure that the cash is able to sustain for the period as long as you live. 


If you want to know more about how to fully utilize your existing assets without wasting any opportunity cost and for your retirement planning, leave your details below.