Step 2 of 4
Size it and store it
Your emergency fund must be ready anytime, even at midnight or on a holiday. That means keeping it liquid: in an account you can withdraw from quickly and in full, without penalties or losses.
Good places
- A savings account separate from your everyday spending account
- A PDIC-insured digital bank that pays higher interest (see Chapter 3)
Avoid stocks, equity funds, real estate, VUL and time deposits with lock-in periods. Their value can drop, or your money can get stuck, right when you need it.
Calculate your emergency fund goal
Your emergency fund goal
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Months covered today
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Time to reach your goal
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Don't save more than you need
Once you reach your goal, extra cash sitting in savings has an opportunity cost: the returns you give up by not investing it. If your monthly expenses are ₱25,000 and your goal is 6 months, or ₱150,000, and you have ₱250,000 saved, the extra ₱100,000 could be working harder for you. Keep your goal amount in savings and invest the rest (Chapter 6).
Savings accounts pay little, and inflation slowly lowers what your money can buy
- Today₱100,000
- In 5 years₱82,200
- In 10 years₱67,600
- In 15 years₱55,500
- In 20 years₱45,600
Review your goal once a year, and top it up right away whenever you use it.
Free Emergency Fund Calculator
Get a detailed plan on planwealth.ph, or track your fund in Google Sheets.