Step 1 of 4
Why you need an emergency fund
This chapter builds Level 2. It keeps a surprise expense from pushing you back into debt.
- Goal
- Have cash ready for emergencies, so you never have to borrow when something goes wrong.
- Milestone
- Your first ₱10,000 saved, then 3 to 6 months of expenses (up to 12 if your income is irregular or you're an OFW or business owner), kept where you can withdraw it anytime.
- Next step
- Open a separate savings account just for emergencies and set up a monthly transfer into it.
Your place on the pyramid
- 6
- 5
- 4
- 3
- 2Establishing an emergency fund
- 1
- Starting point
Protect your money before you grow it. An emergency fund is money set aside for things you can't plan for, like medical emergencies, job loss and urgent home or vehicle repairs. It keeps you from going back to zero, or into debt, when life surprises you.
Why 3 to 6 months?
Aim for 3 to 6 months of your basic expenses. That's about how long it can take to get back on your feet after a big setback:
- Finding a new job can take a few months.
- Recovering from an illness or injury can keep you from working for weeks.
- Emergencies don't always come one at a time.
If that feels big, start with one month and build from there.