Why have an emergency fund?
An emergency fund is like the fire extinguisher you keep at home. You hope you’ll never have to use it—but when there’s a need, you’re glad it’s there.
You may need your emergency fund if the unexpected happens:
i. Job loss
ii. Car repairs
iii. Medical expenses
iv. Home repairs
v. Unexpected travel requirements
vi. Unexpected bills (tax or other utilities)
How much should I have in my emergency fund?
Aim to have enough in a savings account to cover 6 months of expenses. Everyone’s situation is different, so you can adjust that number based on your circumstances. These are your monthly expenses:
3 Months
Aim for this if you have no children or others depending on you and an easy-to-replace job
6 Months
Most people should aim to have 6 months of expenses covered in a readily accessible account
9 Months
Aim for this if your income fluctuates (especially if your job is highly dependable on commissions)
Tips to help you build your buffer
Saving even RM50/week (that’s RM2,600 a year) is a great start.
• Use credit wisely – Track your spending to be aware of what you have
• Curb impulse buying — stick with your list
• Avoid fees (late charges, minimum balance, ATM fees, etc.)
• Plan ahead for big purchases
• Avoid cash advances
• Use direct deposit
• Jump start your savings with a tax refund or other windfall