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Life is full of surprises, and some of them can cost a lot of money. Imagine if your car or motorbike breaks down, your AC stops working, your house is on fire, or you lose your job. How would you cope with these expenses? That's why having an emergency fund is so important. An emergency fund is saved up money that you set aside for unexpected situations. It gives you peace of mind and security, knowing that you can handle any crisis without having to borrow money or sacrificing your goals. An emergency fund is like a helmet that protects you from the accidents in life!
An emergency fund is not the same as saving for short-term or long-term savings. It is a sum of money that you keep for unexpected situations or accidents that you cannot plan for. It is not for getting a new phone when your old phone stops working or repairing your motorbike; those costs should be included in your regular budget. The emergency fund is to give you peace of mind and reduce stress and worries so you can sleep well, knowing you have some money ready for a crisis like this.
An emergency fund is a savings account that you can only use for unexpected expenses. Your emergency fund should have enough money to pay for three to six months of your regular expenses.
Save one month's salary into the emergency fund as soon as possible.
The best way to start an emergency fund is to make it a habit to save a portion of your income each month. Set a savings goal for yourself and make it a priority to transfer that amount into your emergency fund account first thing when your salary comes in. This way, you won't have to worry about having enough at the end of the month.
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