Smart Tips for Preparing an Emergency Fund: Anticipating Financial Surprises

Financial shocks can strike at any time, such as job loss, sudden illness, or unexpected home repairs. Therefore, having an emergency fund is crucial. This fund serves as a financial cushion that can help you remain stable during these difficult situations.

Here are five smart tips for preparing an effective emergency fund:

1. Determine Your Emergency Fund Target

The first step is to determine how much money you need to save. Generally, an ideal emergency fund is 3-6 times your monthly expenses . If you have dependents or a less stable job, aim for a larger amount, such as 9-12 months.

• Calculate monthly expenses: Record all your regular expenses, such as installments, electricity bills, transportation, food, and so on.

• Multiply by your monthly target: If your monthly expenses are Rp5,000,000, then your emergency fund target is between Rp15,000,000 and Rp30,000,000.

2. Separate Emergency Fund Account

Don't mix your emergency fund with your everyday accounts. Keep it in a separate, hard-to-access account to prevent unnecessary use.

• Choose a separate savings account: Use a special savings account that does not have an ATM card.

• Take advantage of the 'lock' feature: Some banking apps have a feature to lock certain balances, so they cannot be withdrawn or used without confirmation.

3. Automate Savings

One of the easiest ways to build an emergency fund is to automatically save. Make saving a priority, not what's left over from spending.

• Create an autodebit: Set up an automatic transfer from your paycheck to your emergency fund account every month.

• Allocate a percentage of income: Set aside at least 10-20% of every income you receive for an emergency fund.

4. Refill Used Funds

Once your emergency fund is used, immediately replenish it. A depleted emergency fund can no longer provide you with optimal protection. Treat this fund like a savings account, always topped up.

5. Look for Additional Sources of Income

If you're having trouble saving from your primary income, consider finding additional income. This extra money can be fully allocated to accelerating the growth of your emergency fund.

• Freelancing: Leverage your skills to get side projects.

• Sell ​​unused items: Try selling items you no longer need to build up your emergency fund.

By following these tips, you can build a strong financial safety net and be ready to face any challenges in the future.